Asobancaria once again attacked ‘forced investments’

When it seemed that the controversy over the proposal for forced investments that is part of this Government’s economic reactivation plan seemed to be over and would be resolved in an agreement between bankers and the Casa de Nariño to generate an injection of resources in key sectors of the economy, a new chapter of this discussion opened in the country after recent statements by President Gustavo Petro.

The head of state himself was the one who indicated, during his speech at the installation of Congress on July 20, that he will not make agreements on this issue and that he will take to Congress the initiative that seeks to expand the range of investments directed toward four mandatory sectors, which are agriculture, tourism, housing and industry, which have mostly been the most affected by the slowdown.

This led the banking sector to sound the alarm again, arguing that an obsolete model will be used, which does not generate guarantees for investment and could end up causing more problems than it would solve. which is why it is necessary to open the debate and study in depth what we want to do.

Jonathan Malagón, president of Asobancaria, said that over the last few years it has been shown that forced investments are not the way forward, much less to finance the Government’s recovery plans, starting because they end up scaring away the arrival of new capital and undermine the confidence of investors.

“In Latin America there were 15 forced investments in nine countries and only five persist. This model has already been dismantled in the vast majority of the territories that implemented it in the 70s and 80s, because they were the fundamental source of financial repression. The high interest rates associated with the developmental model in history were associated fundamentally due to maximum rates and forced investments,” explained this union spokesperson.

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On the other hand, for the representative of the banks, forced investments can also be reviewed as a cross-subsidy that generates several conceptual problems in the panorama, since it will end up benefiting a few, while others will have to face higher rates, which is why he does not see it as viable.

“A forced investment is a cross-subsidy. It is an agent that pays a higher rate so that others pay a cheaper rate. For example, when we talk about public services, it is that strata 4, 5 and 6 pay higher public services in order to subsidize the rate of strata 1 and 2, which makes perfect sense,” he began by explaining.

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However, in the scenario that is planned to be developed, he said that “When someone says that they are going to reduce the loanable funds of the Colombian economy so that some sectors receive cheaper credit, resulting in all sectors, all the others, having higher credits, we are reducing the size of deposits and, therefore, all the others have higher rates, there is a very complex horizontal problem.”

In this regard, he warned that the Government’s idea would end up seriously impacting productivity since, although it will boost some specific sectors, in the long run it will leave fewer resources to finance the bulk of the economy, thus limiting growth. Because of this, he was emphatic that the discussion should not be taken lightly.

Jonathan Malagón, Trade Council forum

Courtesy – CGN

“Is it that wealth or poverty belongs to the sectors and not to the producers and not to the individuals? Politically, it is very difficult to sustain debates because if one goes back to history, it teaches a lot. It is enough to see the debates in Congress in the 80s and the warnings that were raised regarding the productive sector.“, added the President of Asobancaria.

Contrary to what the Ministry of Finance is seeking with the reactivation plan, Malagón proposed that any economic policy initiative, such as the proposal for forced investments, be evaluated in terms of its horizontal and vertical impact on the economy, stressing that there should be no inadvertent penalties for specific sectors or that distort the efficient allocation of financial resources.

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Popular economy

Within his approaches and adding to those proposed by entities such as the Ministry of Commerce and President Gustavo Petro himself, the president of Asobancaria, Jonathan Malagón, addressed the challenges of the popular economy in Colombia, at which point he added that alternatives can be sought for reactivation.

“We should provide one million loans to a segment of the popular economy. The Government defined this by decree, but the execution has been limited. The banks have provided 250 thousand of the 265 thousand loans, showing that instruments such as the National Guarantee Fund have a crucial role. We must make these instruments compatible with the government’s objectives to ensure a real and significant impact on the popular economy”; he explained.

In this way, Malagón closed by saying that it is necessary to speed up the processes within the State to avoid the same bureaucracy become a barrier and instead become an ally of development and the reactivation that has been requested so urgently from various sectors.

Jonathan Malagón, Trade Council forum

Courtesy – CGN

“Let us not demonize construction in capital cities or in the main urban centers. One cannot say that it is wrong to build new housing in Soacha, or that it is wrong to build new housing in Mosquera, or in La Soledad; say that subsidies should not go to cities next to the large capitals, because of course they have to go there, because that ends up boosting the GDP,” he said.

This union spokesman closed by saying that there are many proposals and initiatives to reactivate the economy without sacrificing some sectors to save others and in that sense he asked that spaces for conversation be opened so that These issues should be addressed urgently, but with the understanding that the future of the country is at stake.