(CNN Spanish) — The first great ministerial romp of President Gustavo Petro took many by surprise in Colombia due to the departure of several of his ministers a few months before completing his first year in office.
One of those who left was Jose Antonio Ocampo, a key official due to his academic career and the confidence he projected in the markets due to his moderate tone regarding the government’s monetary portfolio. Ocampo was key in the tax reform that Congress approved last year, the first major reform of Petro’s term.
His replacement will be Ricardo Bonilla, a very close official President Petro, who will have in his hands the difficult mission of maintaining economic stability in the country and projecting confidence both inside and outside the country.
I was appointed by President @petrogustavo as Minister of Finance, replacing @JoseA_Ocampo. I thank the President and I promise to fulfill the functions of the position. I greet Minister Ocampo and acknowledge the work done. I will maintain economic stability.
– Ricardo Bonilla (@ricardobonillag) April 26, 2023
Bonilla is an old acquaintance of petrism. Before his arrival at the Ministry of Finance, he worked in the public sector, at Financiera de Desarrollo Territorial, Findeter, an entity attached to the Ministry of Finance. He has studies in economics at the National University of Colombia, at the Jorge Tadeo Lozano University in Bogota and at the University of Renne in France. He was also a professor at the Javeriana and Nacional universities in Bogota.
But this, of course, is also a political appointment: Bonilla was Secretary of the Treasury of the Bogota Mayor’s Office for years during the period in which Petro was the mayor (2012 and 2015), and for the 2022 presidential campaign he was an advisor on economic and pension issues of today’s president.
“Clearly Petro feels more comfortable with people who have accompanied him all his life, with people who are related to his political project, who understand his objectives, who understand what messages he wants to give,” Sergio Guzman told CNN en Espanol. , director of Colombia Risk Analysis, a Bogota-based think tank.
Analysts consulted by CNN agree that although Ocampo was a key figure to show moderation of the Petro government, considered the first president of the left in modern politics in Colombia, he also somehow held back the president when it came to promoting some of their monetary policies.
“Ocampo was a constant obstruction, because precisely… he did not allow anyone to do anything crazy, he had the ability to say no to the president, particularly when some of the proposals implied some type of macroeconomic risk. And that to the markets, in a certain way, gave them peace of mind,” Guzman said.
However, the appointment of Bonilla, who has not been away from the national government, and who is close to the president, allows him to reach a “natural place” where he should be, Esteban Salazar, director of Governance and Democracy, told CNN of the Peace and Reconciliation Foundation (PARES).
“It is notable that the initial bet that President Gustavo Petro had was that if he managed to guarantee a moderate image in his government, specifically on the economic side, which is why Jose Antonio Ocampo participated, then they would be able to pass the reforms in his whole,” Salazar told CNN en Espanol.
“What Petro did was a castling of someone who naturally should have held that position,” added Salazar, referring to the accompaniment during the campaign. “Bonilla is going to be more of a person who is going to allow the president to have more freedoms regarding his proposals and that he is not going to serve as a firefighter or as a brake, but rather as a promoter to find solutions regarding the bets that have the president”.
Salazar describes Ricardo Bonilla as “an orthodox economist”, “a promoter to deepen the president’s agenda regarding what can be done within the framework of the institutional framework of his competence.”
And although Petro had to risk a moderate minister like Ocampo, his replacement “is a person who has respect, recognition from the academic world, from the business world,” Andres Davila, a faculty professor at the Faculty of Political Sciences and International Relations of the Javeriana University of Bogota.
“Ricardo Bonilla does not generate the sensation of a change that radicalizes the management of the economy in any direction and rather ensures stability, good behavior and a commitment to maintain that stable character in the operation and performance and achievements of the Colombian economy.”
The internal challenges of Ricardo Bonilla
This week, with the Petro ministerial romp, the markets, which “are naturally nervous and react to political events,” according to Guzman, shuddered, and one measure of that nervousness is the price of the dollar in Colombia. With a difficult political panorama due to a health reform that did not advance in Congress and a bankrupt government coalition, at the beginning of the week the price of the dollar was around 4,515 pesos, and this Thursday it exceeded the barrier of 4,600 pesos , aiming at 4,700.
And if the price of the dollar rises, Colombians will be directly affected, Maria Camila Gonzalez, a journalist and co-founder of Economy for Pipola digital economics medium that explains economic moves in a simple way.
“It is not so much the effect of the election of this minister but the uncertainty that this appointment generates,” says Gonzalez.
Analysts agree that although it is too soon to determine the economic course of the country headed by Bonilla, the truth is that his range of action will determine the confidence of the markets both in Colombia and abroad.
“Everyone is going to be very aware of what he (Bonilla) says, of the changes in relation to the bills, and something else called the risk premium will also depend on that, which is how attractive we are to the world,” said Angelica Gomez Benavides, a journalist and also co-founder of Economia para la Pipol.
“If we are less attractive because of what Bonilla says, our debt will rise and also in the future we will have to pay more interest and then pay more taxes and in this way we would also all be affected.”
Challenges with the foreign market
And although Bonilla’s focus will be internal, he cannot ignore the external market. One of those challenges for the new Finance Minister will be not only to generate cohesion in the country, but also to project that confidence in international markets.
During these eight months of Petro’s government, former Minister Ocampo was in charge of making a “counterweight” to the speeches of both Petro and the Minister of Mines and Energy, Irene Velez, that with the energy transition proposed by the president they would stop licenses for hydrocarbon exploration. “He was trying to qualify that,” he said of the outgoing minister Adriana Eraso, Latin America director for Oil & Gas at New York-based Fitch Ratings.
“The challenge for the new minister is to be able to articulate Velez’s energy policy with a viable and sustainable fiscal and economic policy,” Eraso told CNN. “What he does with investors is to tell them ‘there is no framework for the future to be able to invest the money and tell them that the industry is not going to continue growing.”
“It’s not that investment is diminishing, but it is holding it back,” he added.
So although the situation in Colombia is not such that investors take their money and leave the country, says Eraso, clarity must be made about the possibilities of making profitable investments in oil and hydrocarbons, and in that the incoming minister must help unite the government’s discourse and avoid a fiscal deficit due to lack of investment.