COLOMBIA FRENTE A LA COYUNTURA FINANCIERA INTERNACIONAL (Article published in Spanish)

Abstract

The outlook for the Colombian economy, and more specifically for its fiscal health and exchange rate, are analyzed in the light of Washington´s policy recommendations (spending cuts, privatization and free trade), and criticism of these policy measures by Nobel Laureate Joseph Stiglitz. Stemming from the experience of countries in Southeast Asia, and their generally successful response to the international financial crisis, it has become clear that policies of fiscal austerity and exposure to foreign markets enhance their credibility with international financial institutions. Nonetheless, Argentina and Brazil have both served to undermine such confidence. Argentina now faces chaos, with a devaluation of 250% and severe restrictions on commercial operations. Brazil is also at grave risk, despite the support received from the IMF. Colombia now faces a critical situation of its own, and will require a high degree of fiscal austerity despite its excellent record of meeting its obligations. However, if fiscal restraint is not accompanied by appreciable economic growth, the situation may not be sustainable. The interplay of these factors is brought to light by Stiglitz´ criticism of globalization. Because of serious doubts as to the efficiency of markets, Stiglitz favors programs with a higher degree of social content and a more gradual rate of growth. In the long term, higher exports, regional integration and fiscal austerity will be instrumental in guiding Colombia along the path of sustained development.