August 21, 2019 / 7:31 PM / 2 months ago

Reforms to Colombia capital market may face rough road in Congress: experts

BOGOTA (Reuters) - Colombia’s capital market requires a long list of reforms to attract new investors and boost the local market, but may face a thorny path to change as the government wrestles with limited congressional pull, experts and executives said this week.

FILE PHOTO: Colombian Finance Minister Alberto Carrasquilla Barrera speaks with Colombian lawmakers during a tax reform bill debate at the congress building in Bogota, Colombia December 18, 2018. REUTERS/Luisa Gonzalez/File Photo

An independent expert commission named by the government last week recommended more than 60 reforms for Latin America’s fourth-largest economy. The reforms are focused on simplifying a hodgepodge of regulations for financial institutions and modernizing the market’s structure.

Simpler changes could be made via government decree, but others will require congressional backing at a time when President Ivan Duque is struggling to get lawmakers’ support and amid warnings that failure to pass economic reforms could endanger the country’s credit rating and its economic recovery.

Some reforms could move ahead in the coming months, Finance Minister Alberto Carrasquilla told a stock market conference on Tuesday, but the road for others is long.

“It’s a roadmap that we’re only just beginning,” Carrasquilla said. “I would hope that in the next couple of months we will have defined what can be implemented rapidly, which we’ll take to Congress. From now to the end of the year we could have a first block of decisions made, in process or totally implemented.”

Carrasquilla did not specify which proposals will be prioritized.

Colombia has Latin America’s third-largest public debt market after Brazil and Mexico, according to government figures, equivalent to about 30% of its $292 billion gross domestic product.

But the Andean country has just 68 companies listed on its stock market - far behind its Pacific Alliance allies Peru, Chile and Mexico, which have 232, 212 and 142 listed companies, respectively.

The average daily transactions on Colombia’s stock exchange total less than $50 million.

“It’s clear that a market with these conditions can’t achieve its primary function, which is to funnel the public’s savings toward financing investments the business sector needs to increase productivity,” German Arce, president of the Fiduciary Association of Colombia, said on the sidelines of the conference.

Over-regulation and the high cost of participating in the stock exchange deter business from launching public offers, conference attendees said.

Local reforms are also needed to speed the integration of the Pacific Alliance markets.

“A regional market is a strategic objective for us and it should be worked on from the highest levels of government (...) to make reality something that is difficult because it requires convincing three or four governments,” Banco de Occidente President Cesar Prada told the conference.

Reporting by Nelson Bocanegra in Bogota; Writing by Julia Symmes Cobb; Editing by Matthew Lewis

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