Oxford-Educated Santos Ally Made Colombia Central Bank Chiefby and
Juan Jose Echavarria was central bank co-director for 10 years
Echavarria was economic advisor in Santos re-election bid
Colombian policy makers elected a former board member educated at England’s Oxford University as central bank governor.
Juan Jose Echavarria, 64, was a bank co-director from 2003 to 2013 and is a close ally of President Juan Manuel Santos and was an adviser on economic affairs in Santos’s 2014 re-election campaign. He takes office in January.
Echavarria seems to be close to center of the board in terms of monetary policy stance, being neither a “hawk” nor a “dove” in terms of inflation, according to Credicorp’s Daniel Velandia, the analyst with the best record of forecasting central bank decisions in Bloomberg surveys. That contrasts with outgoing Governor Jose Dario Uribe, in office since 2005, who tended to take a hard line on inflation, Velandia said.
“I see him as neutral, where as Uribe was pretty hawkish,” Velandia said in a phone interview.
Echavarria inherits an economy growing at its weakest pace since the aftermath of the 2008 global financial crisis, and inflation that is cooling from its fastest pace in 16 years. The bank has repeatedly pledged to get inflation back below 4 percent by the end of 2017, and co-director Carlos Gustavo Cano has warned the bank’s credibility will be at “serious risk” if Colombia misses its inflation target for a third straight year.
Echavarria got his a PhD from St. Anthony’s College, Oxford, with a thesis on Colombian industrialization. He’s also been head of Fedesarrollo, an economics think tank. His biggest challenge as co-director was helping formulate Colombia’s response to the 2008 global financial crisis, he said in a November phone interview.
“He’s a bit closer to the government than Uribe, but this doesn’t mean the bank will lose its independence, since he’s a technocrat,” said Sergio Olarte, an economist at BTG Pactual. “At first, one could think that the bank will be closer to the government.”
The government is represented on the board by Finance Minister Mauricio Cardenas, although policy makers often ignore advice from Santos when he weighed in on matters such as interest rates and peso intervention.
After Santos won a second term, he put Echavarria in charge of a commission to seek ways to boost coffee farmers’ incomes, which had been hit by falling world prices and a peso rally. Echavarria’s recommendations of liberalizing the sector and curbing the power of the Federation of Coffee Growers got him into a fight with the politically powerful lobby group, and the government didn’t implement his main proposals.
Colombia will start to cut the 7.75 percent policy rate in February as inflation slows toward the target, according to the most recent central bank survey of economists. The Andean nation targets inflation of 3 percent, plus or minus one percentage point.