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Colombia finds the price of peace

Wealth tax proposed; Finance minister sensitive to FDI fears

Mauricio Cárdenas, Colombia’s finance minister, says the country won’t pay for peace with its fiscal stability.

Private sector estimates on the cost of a peace agreement with the rebel faction Farc – which has yet to be finalized – will be as high as 3.8% of GDP. While Cárdenas says that the costs are yet to be determined, because the peace accord is not yet finalized, he says there will be no change to the financial stability law that has underpinned Colombia’s recent growth.

“We are sticking to the fiscal rule, which we think is fundamental for our economic credibility,” he says. “The framework we have has allowed Colombia to gain better access to the financial markets – we have a higher credit rating than we had four years ago and the interest we pay on our bonds is much lower so the fiscal rule is something we will defend.”

Colombia is working on a progressive tax reform to tackle inequality. The proposals include a wealth tax – with a 1.5% annual levy on net assets and a proposal to increase corporate tax to 37% from 34% for companies earning more than $500,000 in profit.

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