José Antonio Ocampo, Minister of Finance. Bloomberg

the ambitious reform of the pension system of Colombia will create an important new player in the local market and strengthen demand for the country’s bonds, according to the Minister of Finance, Jose Antonio Ocampo.

The retirement invoice to be sent to the Congress of the Republic on March 22, he will create a savings fund that can invest in local debt, Ocampo said, in a broad conversation with Bloomberg in Panama City that also touched on his own future, as well as the Banco de la República decision this month. compared to interest rates.

The official said he aimed to avoid any decline in the national savings rate or demand for peso government bonds called TES (debt securities).

“From the perspective of the Ministry of Finance, in all discussions with the Minister of Labour, one of our first principles is that there can be no reduction in demand for TES,” Ocampo said. Bloomberg in an interview in Panama City, where the Annual Meeting of the IDB (Inter-American Development Bank) was held. “There will be no effect. In fact, there might be a slightly positive effect on demand for TES,” he added.

The initiative is part of the president’s radical attempt Gustavo Petro transform the colombia social benefits, would transfer to the public pension system a large majority of workers who currently contribute to private pension funds. Since these money hold around a quarter of outstanding TES, many investors are concerned about the risks to this market if one of its major players weakens.

For Ocampo, these fears are unfounded, since the new fund will be an additional source of demand. The government wants to allocate 20% of payments from the state system to this fund, and the percentage will increase after 2030.

“The fund will be able to invest in corporate bonds, but it won’t buy stocks,” Ocampo said.

The government has not yet decided who should manage the fund, but it will do so regardless of Colpensions – the country’s public pension provider – and the Ministry of Finance, he said. The fund manager will be selected by competition and could possibly be a public institution.

The Petro government, in place for seven months, is seeking to improve the social benefits and reduce inequality with a package of new laws, including the Pensions Bill. Petro also wants to reform the country’s healthcare system, also increasing the role of the state, and strengthen workers’ rights with a labor bill.

All three bills are subject to change as they pass through consideration Congress of the Republic. Over the past year, Colombian local bonds have been the worst performers in an index of Bloomberg emerging markets.

One of the reasons for the poor performance is Petro’s promise during his election campaign last year to phase out Colombia’s dependence on oil and coal, which currently account for about half of exports. He pledged to no longer issue exploration licenses and said the transition to clean energy will take about 12 years.

Since taking office, the government has sent mixed messages on the issue as different ministers contradict each other. Last week, the Deputy Minister of Mines and Energy, Christian Andres Diaz, He said there will be no new contracts “for now”, but clarified that this does not mean that “there will never be any new contracts”.

Ocampo said the government hopes to give “a definitive answer” on whether to award new contracts in May, after the publication of a report on oil reserves.

There inflation Colombia’s annual rate accelerated to 13.3% last month, its fastest pace in nearly 25 years. Despite this, and stronger than expected economic activity in January, Ocampo said the central bank it has already done enough to get inflation back on target.

“The recent indicator of economic activity was positive, but demand indicators are actually quite weak, including imports,” he said. “So the demand effect that monetary policy was intended for for high interest rates, in my view, has already been achieved.”

Several factors that contributed to higher inflation are now moving “in the right direction”, he said. These include the international food prices —which are now down—the weather —which is now favorable for domestic food production—and the peso’s rebound from its October lows, he said.

Inflation is about to start to slow towards its target and is already slow motion for low-income households, Ocampo said.

He Bank of the Republic of Colombia will hold its monetary policy meeting on March 30, and traders are divided on whether to extend or end its steepest ever tightening streak with the benchmark rate at 12.75%. Ocampo is on the board, along with six other monetary policy authorities.

Ocampo is seen as the main voice of economic orthodoxy in the Gustavo Petro administration and as someone who controls some of the government’s most radical ideas. This means that investors in Colombian assets should require a “risk premium from Ocampo” in case he leaves government, he said this month Dirk Willer, strategist of Citigroup Inc.

Ocampo said the columbia universitywhere he collaborates with the Nobel Prize Joseph Stiglitzrecently extended its license until June 2024. The university usually grants a two-year license for Public Service. He made an exception for Ocampo when he served as co-chief of the central bank from 2017 to 2020, although that was not common, he added.

Ocampo said that the government will keep spending under control anywaysince there is a “national consensus” that tax rule.

“The issue of spending limits, which of course is one of the critical issues, is something the president agrees on,” he said. “I never heard the president say he wouldn’t welcome the fiscal rule.”

In addition to requesting the capitalization of the entity and supporting the need to improve the efficiency of development projects in the panel “Response to climate change; challenges and opportunities in America and in Latin America and the Caribbean »José Antonio Ocampo said support at various points in the Colombian economy is vital.

At the meeting, he asked for support for the Biodiversity, forest recovery, popular economy and Afro and indigenous populations Columbia.

Likewise, he clarified that the green hydrogen This is an impressive opportunity for Colombia and even more to have a client like Germany.

“These days Germany told us they were buying all the green hydrogen we produced from us. It is an interesting subject as an opportunity, even for our oil company,” he said.

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