Few people in the world have the credentials of José Antonio Ocampo, who was elected new finance minister this Wednesday by President-elect Gustavo Petro. Ocampo, a 69-year-old from Cali, was executive secretary of ECLAC (United Nations Development Organization for Latin America and the Caribbean), deputy secretary of the UN for economic affairs, researcher who worked with Nobel laureate Joseph Stiglitz, and professor at the most renowned universities in the world (Cambridge, Yale, Oxford, Columbia). In Colombia he was already Minister of Finance during the government of the liberal Ernesto Samper in the mid-1990s, in the midst of one of the country’s most serious political crises. And in 2012 he was included in the final list to head the World Bank. If Gustavo Petro wanted to give the markets a calm signal, Ocampo was among his best cards.
“It seems to me that it was a very wise choice, Ocampo is a man full of experience, research and a very deep knowledge of the country and the international economy,” said economics professor Salomón Kalmanovitz, who was co-director of the bank of the republic for several years . “When he was Minister, Ocampo had a very difficult time because there was a very discredited government and there was a crisis in the credit market and I think he overcame them very well at the time. Now he will have another very tough moment as the government of Iván Duque exits the “scratched pot: a monstrous deficit, the highest in the country’s history, and Ocampo will have to make a monumental adjustment from year one of government”.
José Antonio Ocampo, explains Professor Kalmanovitz, “is a neostructuralist. It comes from the ECLAC theory, from Keynesianism, which has strongly influenced the orientation of economics in Latin America”. In short, Ocampo’s vision is not a fully protectionist vision of the economy – he spoke of import substitution and closing markets. But it has a vision that, in the face of open economies, tries to create safeguards so that the country is not so vulnerable to capital market volatility and that it does not stop encouraging innovation to diversify the economy (it does not depend only on oil exports, for example). It is a vision that distrusts the market’s ability to regulate itself, but actively participates in it.
“Latin America has to reinvent itself for its development,” Ocampo told this newspaper in August 2020. For several years, the economist has also been talking about a depoliticization of economic integration – for example in organizations like Mercosur. It promotes the strengthening of international trade integration between the countries of Latin America without the alliance breaking up when left-wing or right-wing governments rise. “We can sell to our own markets,” Ocampo then added.
According to José Antonio Alonso, professor of economics at the Complutense University in Madrid and with Ocampo for almost 30 years, the new finance minister is “one of the few people who has an eye on the international economy”. Working with several international organizations and being a respected academic, he has the potential to be a key interlocutor for Colombia before organizations such as the IMF or the World Bank. “An economy minister needs a lot of capacity for dialogue with relevant actors, and although Colombia is a relevant actor in Latin America, there are other actors at the global level,” explains Alonso. “Fortunately, Ocampo is well known in these forums – the United Nations, the IMF, the World Bank – and that gives him this great capacity for dialogue.” As an example, Alonso explains that Italian Prime Minister Mario Draghi has a has a greater capacity for dialogue, having been President of the European Central Bank for almost a decade.
“What matters to me is how Ocampo handles a triad,” adds Alonso. “On the one hand, it must make up for the accumulated social deficit – in terms of inequalities and wealth of the most vulnerable populations. On the other hand, it must also advance in a productive transformation, in an economy that must gradually decarbonize and make the transition to digitization. And third, how to accomplish these two tasks while maintaining macroeconomic balance. I believe that Ocampo is aware of this, based on the experience of Latin America in previous periods and has always been clear, that stability does not guarantee development, but there is no development without some degree of stability.”
Like Petro and Chilean President Gabriel Boric, José Antonio Ocampo shares a vision of an economy that should be more environmentally conscious and less dependent on hydrocarbons, although he does not speak of ending exploitation anytime soon. “You don’t have to divest yourself completely of natural resources because we are a region that is very rich in natural resources. What you have to see is how you use the opportunities,” he told EL PAÍS. “Metals like copper and lithium, for example, are important for new technologies and are abundant in several South American countries.”
But Ocampo’s first big challenge will be the ambitious tax reform promised by Gustavo Petro during the campaign. “The big difference is in personal income tax, where 1.2% of GDP is paid in the country versus 8.1% in the OECD,” explained Ocampo in a recent article in El Espectador newspaper. “The main problem is effective taxation of income and capital gains, where the effective tax rate tends to fall for the 5% and even more for the richest 1% of the population.” Ocampo spoke of reducing or eliminating tax benefits for legal entities, a wealth tax reintroduce for individuals and increase taxes for companies with high carbon emissions.
In Colombian politics, Ocampo was closer to the left sector within the Liberal Party. He moved to central government in César Gaviria’s presidency (1990-1994) as Minister for Economic Development, but faced several economists there who defended a much faster market opening, while Ocampo defended a more gradual one. In the following government of the liberal Ernesto Samper (1994-1998), Ocampo was his finance minister, although one of his former allies, Guillermo Perry, resigned when the scandal erupted accusing Samper of receiving drug money for his presidential campaign.
Catalina Quevedo, dean of economics at Externado University, acknowledges controlling inflation in the country and sustaining economic growth across the region as one of the accomplishments of this four-year term. He also says that in the Samper government, “there was a high level of debt in the country and controlling that debt became a goal of macroeconomic policy.” The IMF had issued strict debt control guidelines in several countries, and one of Ocampo’s jobs was to respond to these international demands. “A great effort has been made on issues of debt and currency appreciation control that have been satisfactory for the country and the signal that has been sent to the multilateral entities that have put so much pressure on the government,” Quevedo adds.
Ocampo and the Samper government stuck to Gaviria’s economic opening, but at the same time tried to increase social spending. Samper had approved a national development plan called “El Salto Social,” which prioritized larger investments in social programs and infrastructure. “Trying to combine a more liberal economy with very active social policies was no easy task,” Ocampo wrote in 1998, when the Samper government had already ended. He adds in his text that at that time it was not possible to increase tax revenues sufficiently in the four-year period to sustain the desired public sector investments. Two decades later, faced with a different but equally complex economic crisis, José Antonio Ocampo is given a second chance.
For now, given the jitters fueled by Petro’s economic program, business has celebrated the decision to give Ocampo the post of finance minister. “He’s a serious person, a person who inspires confidence,” said President of the National Business Association of Colombia, or Andi, Bruce Mac Master. “José Antonio Ocampo’s appointment inspires confidence in the technical and weighted nature of the government’s macroeconomic policies,” said Hernando José Gómez, president of Asobancaria, a union that unites the financial sector. Just like Chilean Gabriel Boric when he appointed renowned economist Mario Marcel, Petro found the letter in Ocampo to reassure businessmen.
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