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Colombian President-elect Gustavo Petro named Jose Antonio Ocampo as finance minister in a move that should help ease concerns among investors who have been bracing for unpredictable economic policies under the nation’s first leftist government.
Ocampo, 69, is one of Colombia’s best-known economists. After joining Petro’s team of economic advisers, he wrote that the new government’s “greatest challenge” is overcoming social inequalities, which will require greater spending and an increase in tax revenue.
He served as finance chief in the 1990s, and has also been agriculture minister and head of the National Planning Department. More recently, he was a co-director of the central bank and a professor at Columbia University.
Ocampo’s pick failed to propel the peso, which joined losses in most emerging-market currencies amid a negative mood toward risk assets on Thursday. The peso fell 0.6% to 4,141 per dollar, extending its month-to-date losses to 8.9%, the third largest among the world’s major currencies. Sovereign dollar bonds were little changed.
“Ocampo is respectful of institutions,” including the independence of the central bank, said Munir Jalil, Andean chief economist at BTG Pactual. “What markets don’t like is inexperience. If investors see a plan that can be classified as reasonable and not radical, markets will calm down.”
Petro’s plans to halt oil exploration and overhaul the pension system while increasing taxes have spooked the business community and investors in Colombian assets. Ocampo will need to maintain investor confidence and at the same time have the political gravitas to advance the agenda of the president, which includes increased welfare payments for millions of poor Colombians.
The decision to name Ocampo is another sign of possible moderation from Petro who will have to contend with a divided congress in his push to overhaul the economy. He’s already built new alliances with centrist political parties and met with President Ivan Duque, former President Alvaro Uribe and his rival in the runoff Rodolfo Hernandez since the election.
Ocampo will also have a say on monetary policy, holding a seat on the central bank’s board of directors. Inflation has spiked to 9.07%, near the highest level in almost two decades. The bank will meet on Thursday, with most analysts expecting a 150 basis-point increase to its key interest rate, the biggest since it started targeting inflation, to 7.5%. Petro, like other politicians during the campaign, criticized aggressive campaigns of monetary tightening.
Colombia is expected to expand 5.8% in 2022, the fastest pace among major economies in the Americas, according to the International Monetary Fund.
Petro, a former guerrilla and trained economist, has been a lawmaker for decades and was mayor of Bogota. His ambitious green agenda includes converting state oil company Ecopetrol SA into a renewable powerhouse. He’s promised to give a job to every Colombian who wants one and argues for a new approach to the public health system. He wants to propel the agriculture industry while imposing greater regulations and taxes on large landowners.
Petro takes office on Aug. 7.
Ocampo has co-authored books with Nobel prize-winner Joseph Stiglitz. He has argued for a more “active” use of the exchange rate and has made the case for Colombia to diversify its exports basket.
Ocampo “believes in an important role of the state in the economy,” said Andres Pardo, chief Latin America macro strategist at XP Investments. “He is not an orthodox free-marketer, but would be relatively market friendly and fiscally responsible.”
Former Finance Minister Mauricio Cardenas wrote on Twitter that Ocampo’s “experience, knowledge and firmness are a guarantee for all.”