Colombian investors are reeling from the ouster of the man who did more than anyone else to bolster their faith in the country under its first-ever leftist government: finance chief Jose Antonio Ocampo.
(Bloomberg) — Colombian investors are reeling from the ouster of the man who did more than anyone else to bolster their faith in the country under its first-ever leftist government: finance chief Jose Antonio Ocampo.
The sudden shuffle by President Gustavo Petro is expected to send financial markets sliding when they open on Thursday. While local markets were mostly closed when the announcement hit Wednesday, the cost of insuring Colombia’s debt against default soared, while the nation’s bonds and peso slumped in late trading.
After some initial turbulence, the longer-term investor reaction will likely depend on whether the new minister, Ricardo Bonilla, can serve as a moderating force in the president’s administration. Ocampo, probably Colombia’s best-known economist, had a status that allowed him to repeatedly rein in more radical proposals from officials, including Petro himself, on everything from oil policy to capital controls.
Time after time, Petro would float a controversial idea that caused bonds to drop until Ocampo walked it back. It’s less clear if Bonilla, who ran the city of Bogota’s finances from 2012 to 2015 while Petro was mayor, would take a similar approach.
“Ocampo was known to the market and had a name to protect, which gave him certain independence from the president,” said Benito Berber, an economist at Natixis. “Bonilla seems less independent.”
In a Twitter post Wednesday, Bonilla promised to “fulfill the functions of the position” and acknowledged the work done by Ocampo. “I will maintain economic stability,” he said.
Bonilla is an economist who has taught at the National University in Bogota, among other institutions. He has also served on the board of natural gas distributor Grupo Energia Bogota SA, and most recently was head of the state development bank Findeter.
His appointment was part of a wider shake-up of cabinet ministers by Petro, who took office in August. Other cabinet changes include the ministries of health, agriculture and transport. Energy Minister Irene Velez, whose anti-oil stance has alarmed some investors, will remain in her role.
As mayor, Petro had a large turnover of staff in key positions, but he never fell out with Bonilla, suggesting that the pair have a close relationship. In his time as Bogota’s finance chief, Bonilla oversaw a drop in the city’s debt load, while Fitch Ratings praised the city’s “sound financial performance” and “conservative debt policy.”
During last year’s presidential campaign, Bonilla said in an interview that Colombia needed to boost tax revenue to simultaneously fund social programs while cutting the fiscal deficit.
Market Slump
The peso weakened as much as 2.7% in next-day trading after Petro’s announcement. The selloff likely will continue when trading opens Thursday, said Andres Pardo, a strategist at XP Investments.
“This is bad news for Colombian assets,” he said. “Bonilla is much more aligned with Petro’s economic vision than with Ocampo’s.”
Investors will be monitoring Bonilla’s first statements as minister to gauge whether he’ll respect Colombia’s fiscal rule, which limits how much the government can borrow, and central bank independence, said Juan Pablo Espinosa, vice president of risk at Proteccion SA, one of the nation’s two largest private pension funds.
Ocampo’s insistence on maintaining these two pillars helped underpin Colombian asset prices in recent months, Espinosa said.
Ocampo said he will stay in the role for a few more days. The central bank is set to hold its next policy meeting Friday, and the finance minister is a voting member of the board.
Petro has complained about the central bank’s interest rate increases in recent months. Ocampo repeatedly ignored the president’s wishes and voted for monetary tightening to curb a surge in inflation.
–With assistance from Patricia Laya, Oscar Medina and Ezra Fieser.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.