Gutierrez Seeks to Fund Colombia Growth Plan While Curbing Debt

(Bloomberg) -- Colombian presidential candidate Federico “Fico” Gutierrez, the main challenger to leftist Gustavo Petro, is planning a tax reform to gradually increase revenue over 10 years, according to one of his top advisers.

That will help fund an ambitious plan to boost growth, tackle infrastructure bottlenecks and build a million homes for low-income families, but without running up unsustainable debts that would scare off investors, said Manuel Fernando Castro, who is helping formulate the candidate's economic program.

Tax increases are an explosive topic in the Andean nation after an attempt by President Ivan Duque to raise revenue triggered weeks of rioting last year. Gutierrez would seek a broad consensus before sending a bill to congress, and would ensure that it doesn't hurt vulnerable households or the middle class, Castro said Friday, in a video interview.

By tripling spending on country roads, Colombia can boost productivity and integrate rural districts into the national economy, Castro said. The nation's major cities are generally served by large, well-maintained highways, while remote towns are connected by dust tracks that turn to mud when it rains. That makes life misery for farmers trying to get their produce to market, and hinders the development of swathes of the national territory.

“This holds back competitiveness, productivity and makes costs very high, including for passenger traffic,” Castro said.

The nation ranks 104 out of 141 countries in quality of road infrastructure according to the World Economic Forum's Global Competitiveness report. That's lower than Bolivia, one of the poorest countries in the Americas, as well as many African countries.

As well as improving the nation's byways, Gutierrez would continue with the highway and port and airport-building programs known as 4G and 5G, Castro said.

Investor Confidence

Gutierrez has pledged to ensure his spending plans stay within the fiscal rule, which limits the government's ability to run up debt. The campaign sees this as key to maintaining confidence and will publish a document detailing the cost of of the proposals as soon as this week, Castro said.

After Duque shelved the attempt to raise taxes after mass unrest, the nation lost its investment grade credit rating. The government was later able to get watered-down tax increases passed by congress.

Read more: Fitch Cuts Colombia to Junk After Plan to Hike Taxes Shelved

Main Rival

Gutierrez's manifesto contrasts with that of his main rival, Senator Gustavo Petro, who sees a bigger role for the state in guaranteeing jobs, protecting local producers via tariffs and promoting green energy.

Gutierrez, in contrast, regards the private sector as key to growth, according to Castro. An alliance with private companies will be key for his infrastructure plans, he said.

“The investments that are needed can't be made exclusively with the public budget,” he said.

Former Finance Minister Juan Carlos Echeverry and former Inter-American Development Bank President Luis Alberto Moreno are also working on Gutierrez's economic platform, Castro said.

The economy should be able to grow sustainably at an annual rate of 5%, Castro said. Colombia has been plagued by decades of weak productivity growth, tempered by occasional commodities booms. In the five years before the pandemic hit, the annual growth rate never exceeded 3.3%

Read more: Support for Conservative ‘Fico' Gutierrez Rises in Colombia Poll

A poll by Invamer published last week showed that Gutierrez would get 45% in a second round, while Petro would get 52%.