* Gov't wants pension funds to invest abroad to help peso
* Colombia will speed infrastructure spending
* Lower import duties, energy costs, taxes
* State to subsidize borrowing for low-income home buyers
(Adds comments from finance minister, analysts)
By Eduardo Garcia and Nelson Bocanegra
BOGOTA, April 15 Colombia's government announced
a stimulus package on Monday designed to revitalize the economy
and encourage pension funds to invest more money abroad, a step
aimed at braking the rise of the national currency.
Colombia's economic growth slowed to 4 percent in 2012 from
6.6 percent a year earlier. The central bank expects the economy
to maintain the same pace of growth this year as in 2012.
However, President Juan Manuel Santos said the stimulus
package will allow economic growth to reach 4.8 percent this
year - the government's target.
"This effort will cost around 5 trillion pesos ($2.74
billion)," he said at a news conference alongside his cabinet.
"This is a well-designed plan, well targeted. We've designed
it with a lot of care so that it has an impact on productivity
and the economy."
The package includes measures aimed at fostering growth in
the industrial, construction and agriculture sectors and to
accelerate state spending in infrastructure.
Finance Minister Mauricio Cardenas said the measures will be
financed with funds from the 2013 and 2014 national budgets and
that the stimulus package will not threaten the government's
He said the country's biggest economic challenge is to stem
the appreciation of the local peso currency. A stronger peso
cuts into the revenues of exporters and causes problems for
manufacturers who struggle to compete with cheaper imports.
To that end, private pension funds will be allowed to invest
more money abroad. Meanwhile, state-run regional pension funds
will be required to keep their share of mining and oil royalties
Cardenas said these reforms would prompt pension funds to
buy an additional $5 billion in the local currency market.
"This will considerably increase demand for dollars in
Colombia," he said.
However, Francisco Chaves, chief economic analyst at local
brokerage Corredores Asociados, said the measures aimed at
easing peso appreciation failed to meet the market's
"Even though pension funds have the choice to buy more
dollars, that doesn't mean they will do so," Chaves said.
At present, the central bank is buying at least $30 million
a day in the local currency market.
Efforts by the central bank and the government have curbed
the rise in the currency, which began in 2009, bringing the peso
down about 3.4 percent against the U.S. dollar so far this year.
INDUSTRY, INFRASTRUCTURE, CONSTRUCTION
To fuel sluggish industrial output, the government has
decided to lower import duties for raw materials, as well as
taxes and energy costs.
Santos also said that state spending in infrastructure will
be done ahead of schedule in order to stimulate economic growth.
"We've looked into public works that are scheduled for 2014,
2015 and 2016, to see which ones are a priority and which ones
can be brought forward," Santos said.
In addition, the government will also subsidize borrowing
costs for low-income home buyers to foster demand for new homes
in the hope that it will fuel growth in the construction sector.
Critics have long said that in order to stimulate the
economy, the government needs to speed up public spending on
infrastructure and cut bureaucratic and environmental red tape
that is preventing private investment and job creation.
"The best thing about the package is that they are looking
at competitiveness from a broad point of view, instead of
thinking only about how the exchange rate is affecting
competitiveness," said Camilo Perez, chief economist at Banco de
The government, along with the central bank, has tried to
promote more investment from the private sector by providing
subsidies and additional stimulus for banks to give credit.
The central bank has cut the benchmark interest rate by 200
basis points since mid-2012 in a bid to encourage Colombians to
But central bank board member Adolfo Meisel on Friday said
that monetary policy alone will not be enough to foster growth
because the global economic crisis is eating away at remittances
and export revenues.
Colombian exports have fallen in seven of the last 12 months
as cash from overseas buyers dried up or went elsewhere,
damaging economic drivers like oil and mining, which attract the
most foreign direct investment.
(Additional reporting by Carlos Vargas; Editing by Leslie
Gevirtz and Richard Chang)