A couple buys vegetables at a market in Bogotá.Nathalia Angarita (El País)
Within the needles that make up the tachometer of macroeconomic indicators, that of the current account is usually relegated, for most, behind data such as inflation, growth or unemployment. But, after the pandemic, it is one of the measures that most worries economists. The imbalance in the current account deficit, a fundamental resource of economic management and that measures the correlation between income and payments abroad for the exchange of goods, services, income or transfers, reached 21,446 million dollars in 2022, the highest figure in history.
It is a mess blown, to a large extent, by the debts contracted by the State, families, companies or banks to alleviate the social crisis derived from the coronavirus. Colombia, a country very dependent on foreign credit and that since 2001 has always had a negative balance of payments, witnessed last year an exponential rise in a specific item: the so-called balance of factor income, which in a pedestrian language portrays, simply, the difference between what Colombians receive for their investments. jobs and other sources of income abroad, and what foreigners working or investing in the country receive from the same sources.
A segment that clearly marked the annual accumulated with an increase of 97% compared to 2021. Foreign oil and coal companies, in particular, had a great year 2022 and increased their exports from Colombia by 83% and 29%, respectively. That reality ended up deepening a historical gap.
The director of the Department of Economics at the Javeriana University, Andrés Giraldo, points out that foreigners, or multinational companies operating in Colombia, usually repatriate a part of the dollars they earn in their salary or that are their profits.
In turn, the inflow of remittances in dollars sent by Colombians working abroad cushioned the situation very little, despite the fact that it grew by 10% in 2022. The experienced economist Eduardo Sarmiento, author of about twenty books, describes the situation as very risky. His argument is that the country has become accustomed to living in debt and depending on external credit: "Before the pandemic we lived in a world where there were countries with surplus savings. To the extent that interest rates have risen, credit has become more expensive, and the deficit has reached historic figures. It will be increasingly difficult for Colombia to seek resources in international markets to cover our debts. In addition, because industrialized countries also have their own problems, such as the bankruptcy of financial institutions, and are going through times of low growth."
Government sources acknowledge that the current account deficit is large compared to other countries and seen on a historical level, but qualify on the degree of risk because 80% of the country's current account deficit is covered, precisely, by foreign direct investment, which is long-term and generates employment and growth. The example of the Gilinski business conglomerate, which has financial headquarters in Chile but invests with millions in Colombia, is often cited.
This is the case of takeover bids (OPAs) to take control of Grupo Empresarial Antioqueño: businesses that serve as a dynamo for the local productive apparatus and whose dividends are distributed through the financial channel to cover domestic expenses and debts. Other countries resort to other modalities that probably involve more risks, such as portfolio investment (short-term).
Andrés Giraldo, from the Javeriana University, stresses that the situation reminds us that Colombia is a "net debtor of the world." A fact that, he adds, is not necessarily negative: "the problem is how to finance the deficit." That is why it points to the risks of curbing foreign investment in the mining and energy sector, which represents, more or less, 33% of foreign direct investment. The country would have to adjust spending or diversify the export basket into sectors such as tourism. A challenge that from various reports of organizations such as the International Monetary Fund (IMF) has been labeled capital due to various infrastructure shortcomings.
This payment deficit has pressured another worrying account, that of the best-known external debt, which in April reached 54.2% of gross domestic product (GDP), according to data from the Bank of the Republic. The total balance owed by the State and individuals grew 2,903 million dollars so far this year, when it closed at 184,118 million dollars, 53.4% of GDP, in 2022.
Another factor of concern in economic circles and that IMF sources specify that it must be reduced since history suggests that at the international level things are becoming more complex for emerging countries, as is the case of Argentina, which is looking into the abyss of a default on its commitments to creditors. The risk of a massive outflow of capital increases and the chances of obtaining financing shrink.
Andrés Giraldo recalls, by the way, that in recent months there has been, on the one hand, an interesting pulse between the net capital flows that have left the country, but also record records in foreign direct investment. "It is an issue that deserves attention and that the country has to correct gradually," concludes economist Daniel Castellanos, "because it would be very serious if international financing were cut off. The country became very unbalanced on account of the economic policy to get out of the pandemic, which allowed it to have a very rapid recovery, but now it has to make the adjustment because although having a current account deficit is not a sin, maintaining it at current levels leaves the country in a situation of significant vulnerability. "
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