Colombia Seeks to Boost 2011 Spending 2.5 Percent to 147.3 Trillion Pesos

Colombia plans to raise spending next year in an effort to reduce poverty, bolster the economy and create jobs.

The government will submit a plan to Congress that calls for raising budgeted spending next year by 2.5 percent to 147.3 trillion pesos ($79.9 billion), according to a presentation today in Bogota attended by Finance Minister Oscar Ivan Zuluaga. The spending called for in the 2011 budget is equivalent to 25.9 percent of gross domestic product.

Zuluaga, who stands down Aug. 7 when President Alvaro Uribe leaves office, gave details about the budget, entitled “Toward Macroeconomic Stability.” The government has said it expects economic growth of 4 percent in 2011. Colombia Planning Director Esteban Piedrahita said growth will be more than 4 percent this year, revising the government’s previous 3 percent forecast.

The plan includes 22.3 trillion pesos in defense and security spending and 21 trillion pesos on education. An additional 37.4 trillion will go toward paying debt.

South America’s fourth-biggest economy emerged from its first recession in a decade in the fourth quarter. The recovery from the global economic slump has been slower in Colombia than in other South American nations, partly due to a diplomatic dispute with Venezuela that caused a 71 percent slump in exports to the country in the first five months of the year.

IMF Forecast

Colombia’s economy will grow 2.25 percent in 2010, the slowest in South America after Venezuela, which is still in recession, according to an International Monetary Fund forecast. The IMF expects Peru and Brazil to grow more than 6 percent.

Bank of America Merrill Lynch expects Colombia’s economy to grow 4 percent this year, up from a previous forecast of 3.4 percent, it said in a report July 26. The forecast for 2011 growth was unchanged at 3.8 percent, the bank said.

The central government will have a deficit of 3.9 percent of GDP in 2011, down from an expected 4.4 percent in 2010, and a consolidated budget deficit of 3 percent next year, down from 3.6 percent this year.

Uribe, who will be replaced by his former Defense Minister Juan Manuel Santos, has sought to increase social spending for the poorest Colombians. His success in the war against rebel fighters helped boost consumer and business confidence, stoking the economy.

Santos, who named Juan Carlos Echeverry his finance minister, has promised annual economic growth of 6 percent within two years. He plans to achieve that while balancing the budget, creating 2.4 million jobs and expanding the housing, infrastructure and oil and mining industries.

Echeverry has said Colombia should capitalize on its oil and mining riches to reduce debt and create a fiscal stabilization fund that would cushion the economy during crises. Congress is studying a plan to cut debt as a percentage of GDP to 28.4 percent by 2020 from a projected 39.4 percent this year.

To contact the reporter on this story: Helen Murphy in Bogota at hmurphy1@bloomberg.net.

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