Latin America: Colombia's Cárdenas calls for a new vision
While the region has proved its economic and financial resilience in recent years, it’s time to look ahead and become competitive for whatever the next 50 years will bring, says former Colombia finance minister Mauricio Cárdenas.
Mauricio Cárdenas, visiting professor at New York’s Columbia University
Latin America is a region that is ready to start growing again, but it lacks a new story, a new vision about what its role should be,” says Mauricio Cárdenas, Colombia’s finance minister between September 2012 and August 2018 and now a visiting professor at New York’s Columbia University.
“Latin America has to rediscover itself and figure out what it is in the new world economy that it is going to be really good at.” Cárdenas argues that discussions that focus on how well the region has adapted to the shocks of the last decade are introspective.
“We did that and we did that well, and now the conversation should be about how to grow and what role we should play,” he says.
Cárdenas does acknowledge the importance of the improvement in the region’s resilience as the commodity-fuelled growth of the first decade of the century subsided. Many of the countries used the time to strengthen their economic institutions.
Some did not – he points to painful recessions in Brazil and Argentina – but those economies that avoided negative growth show that “the adjustment has mostly been made”.
The focus now should be on defining new sources of growth, be it in services or in new sectors. But these new sources of economic activity and diversification – whatever they may be – will only succeed if the countries provide a financial foundation for them to emerge.
“Latin America needs to be more competitive with regards to accessing finance,” he says. “That means more financial innovation, more financial products – and a new wave of expansion of the capital markets.”
Cárdenas says this region-wide conversation should be a mixture of top-down policymaking and bottom-up innovation from within countries and societies. However, he believes that the broader the search for a role, the greater the chance of success.
“We have to realize that individual countries alone cannot solve all of our problems,” he says. “We need to work together. For example, our independent capital markets are too small. We need a regional capital market if we are to be really competitive and able to attract massive funds that will be needed to finance long-term investment – and to be able to do so on competitive terms.”
We need to be part of the conversation about the new world economy – we need to be right at the centre - Mauricio Cárdenas
As finance minister of Colombia, Cárdenas supported the creation of the Mercado Integrado Latinoamericano (Mila), a stock exchange that unites the Colombia, Lima, Mexico and Santiago exchanges under one trading platform. The aim was to deepen liquidity for and improve corporate financing, but progress has been slow.
Cárdenas argues that the Pacific Alliance needs to accelerate such regional financial plans, rather than now walking away.
“I think the Pacific Alliance is losing momentum for political reasons,” he says, pointing to the developments in Brazil and Argentina as creating distractions for some members – particularly Colombia and Chile – as they seek to embrace the new dynamics in these countries.
“Despite the fact that it’s very important to bring Argentina and Brazil into a wider conversation about regional development, we shouldn’t ignore the important achievements that have been made in the Pacific Alliance. We shouldn’t allow that to slow down. We need to push the conversation between Mexico, Colombia, Peru and Chile – and especially with the new governments in Colombia and Mexico – to make sure they are fully on board.”
Cárdenas also believes that by uniting, Latin America will avoid being marginalized.
“We need to be part of the conversation about the new world economy – we need to be right at the centre. It has been easy to ignore Latin America at times – it’s not a major recipient of aid, like Africa or southeast Asia; it doesn’t have the problems of the advanced economies like the US or Europe; and it’s also not a fast-growing star like China or India,” he says.
While the outcome of this search for a new role for Latin America will emerge from the process, Cárdenas has a few ideas about some concepts that should be core to whatever is defined.
“One of the key challenges for this region is its high level of inequality. I have learned that the only way to create long-term change to address this inequality is through very strong democratic institutions,” he argues. “Democracy is the only way to build the political institutions that will allow for redistribution to take place. That’s something that hasn’t really featured in our history. But now it’s beginning to happen.”