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Roberto Junguito represents Colombia at panel discussion |
IT WAS THE kind of grouping that could only happen at Davos. Five Latin American presidents were assembled in one place in February, for a panel discussion: Alvaro Uribe of Colombia, Eduardo Duhalde of Argentina, Alejandro Toledo of Peru, Vicente Fox of Mexico, and Lula of Brazil. Uribe explained the economic reforms that he had managed to push through with the aid of his finance minister, Roberto Junguito, who was sitting next to Francisco Gil Diaz, his Mexican counterpart.
Gil, recalls Junguito, could barely believe what he was hearing. “How were you able to do it?” he asked. Junguito modestly told Gil that it was largely due to the president’s abilities in selling reform to Congress. But in truth the president would never have been on board were it not for Junguito’s abilities in selling reform to Uribe.
Uribe was not elected for his economic platform: rather, the country, sick of a seemingly endless and intractable civil war, rallied around a strong leader with a clearly-articulated policy of fighting terrorists and the cocaine industry that funds them.
Key man in the team
Junguito is a vital part of the Colombian success story: the experienced, wise adviser who taught Uribe everything he needed to know about fiscal austerity and who kept a watchful eye on the economy while the president was concentrating on matters of domestic security.
“He’s incredibly thoughtful, serious, and soft-spoken, as well as a very good economist and thinker,” says Stanley Fischer, the Citigroup vice-chairman who worked with Junguito at the IMF. Fischer has the highest regard for Colombia’s president and central bank governor but says that “the other two could be there without him and it wouldn’t be a winning combination”.
A first-rate economist who studied at Princeton, the London School of Economics and the Université Libre de Bruxelles, Junguito first became finance minister in Colombia in 1984. His long experience in politics has given him political abilities commensurate with his economic nous, and both are equally important in a finance minister. “To have the academic ability and a clear view on the problem is very important,” he says, since “you really have to go and convince the groups in society that that’s what’s best for them”.
Junguito’s single most important constituent is undoubtedly Uribe, a man with little training in economics. “At first it was tough to explain to him why fiscal adjustments were necessary,” he says, “but once he got it, he was a great help with the politicians.” He explains the way politics has changed under the Uribe administration: “From the 1960s to now, it was customary to support the Congressmen through pork-barrel projects. That was part of the process of getting legislation through. One of the things Uribe said in his campaign was that we won’t be doing that. Once Congress understood that was a rule, they got a lot more serious in criticising and evaluating the reforms as reforms. The academic debate was tougher, but they felt happy that it was not about favours.”
A one-off wealth tax, an income tax surcharge and an increase in the number of goods subject to sales tax will, together, increase government revenues by 1.6% of GDP in 2003. And Junguito has been equally zealous on the spending side. He proposes to freeze nearly all public expenditure at its 2002 level in nominal terms, which should imply fiscal savings of 0.7% of GDP in 2003 and 0.6% more in 2004.
The combined public-sector deficit will drop to 2.5% of GDP in 2003 and 2.1% of GDP in 2004 from its 2002 level of 4%.
Despite the pain that such actions cause, Junguito has managed to sell his fiscal plan to the public at large. “One of the reasons why people have accepted tax increases is that they have regained some trust in the institutions,” says Junguito’s deputy, Ricardo Ortega.
