Berkeley Man Cardenas Takes Over Colombia’s Slowing Economy

Colombia’s Finance Minister Mauricio Cardenas
Berkeley-educated economist Mauricio Cardenas pledged to use “all necessary tools” to protect Colombia’s economy from a rally in the peso after he was appointed Finance Minister yesterday. Photographer: Paul Smith/Bloomberg

Berkeley-educated economist Mauricio Cardenas pledged to use “all necessary tools” to protect Colombia’s economy from a rally in the peso after he was appointed Finance Minister yesterday.

Outgoing Minister Juan Carlos Echeverry, a former teaching assistant of U.S. Federal Reserve Chairman Ben Bernanke, said Cardenas’ main challenges are to keep the Colombian economy growing above 4 percent amid the European debt crisis, and to persuade the central bank to step up dollar purchases.

“We are very aware of the theme of the peso revaluation,” Cardenas told reporters in Bogota after his appointment. “For the productive sector it is a central theme, and we will use all the necessary tools to combat it.”

The peso has rallied 7.1 percent in 2012, the biggest gain of the world’s 31 most-traded currencies tracked by Bloomberg after the Hungarian forint and the Chilean peso, on the strength of sustained foreign investment into the Andean nation’s oil and mining projects. The Treasury began its own program of foreign currency intervention this month after the central bank ignored repeated calls from Echeverry and President Juan Manuel Santos to intervene more “aggressively” in currency markets to help Colombian exporters.

Cardenas takes over a $330 billion economy that will grow 3 percent to 5 percent this year, down from 5.9 percent last year, according to central bank forecasts. Growth is cooling as the slowing world economy damps demand for Colombia’s commodities exports, and industrial output stagnates.

Policy Makers

Colombian economists are forecasting a second straight interest rate cut at the central bank’s August board meeting today, as slower inflation allows policy makers to target faster growth.

Last month’s interest rate cut, the first since 2010, was a “change in monetary stance,” as slower inflation allows policy makers to maximize “employment and product growth,” the central bank said in the minutes to their July policy meeting.

Inflation slowed to 3.03 percent in July, down from 3.73 percent at the start of the year. Colombia targets inflation of 3 percent, plus or minus one percentage point.

The risks of Colombia deviating from its inflation target are low and are restricted to a jump in food prices, policy makers said in the minutes.

The central bank will cut its benchmark policy rate to 4.75 percent, from 5 percent, according to 28 of 32 analysts surveyed by Bloomberg.

‘Narrow Path’

Echeverry, who sits on the central bank’s policy committee, said he will lobby for an increase in dollar purchases one final time at today’s meeting.

The Treasury will continue to buy dollars next week after buying $500 million over the last two weeks, Echeverry said in an interview after his resignation. The intervention is separate from the central bank’s daily $20 million purchases. The dollars are not intended for a debt repurchase, he said.

Colombia’s so-called fiscal rule, which determines a path for spending and the deficit, means the country will pursue similar policies whoever is finance minister, Echeverry said.

“We created the fiscal rule which determines a very narrow path for the minister to make it foreseeable for the markets what the fiscal behavior of Colombia will be,” Echeverry said.


Cardenas, 50, holds a doctorate in economics from the University of California, Berkeley.

He has headed the Mines and Energy Ministry since September after leaving a post as director at the Brookings Institution in Washington. The minister has previously held government positions including transport minister and national planning director.

“Economically, he is a conservative,” Echeverry said. “But nobody is perfect: he’s from Berkeley and I studied at New York University. His flaws come from his West Coast education.”

Echeverry said he resigned for personal reasons, and is looking for a university to employ him in the United States.

He will also work at his consultancy firm and spend more time with his three children, aged 2, 4 and 6, he said.

More Cabinet changes could come during the next few days. Colombia’s entire Cabinet presented resignation letters this week in response to a request from Santos, to allow him to make “changes inside the government team,” the presidency said in a statement.

Santos said Echeverry will be a candidate for a job at the International Monetary Fund.

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