![Colombia’s new finance minister wants fair capitalism](https://i0.wp.com/s.abcnews.com/images/International/WireAP_bb50fb1330cf4096a494d6eb7b06ee9c_16x9_992.jpg?w=1170&ssl=1)
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Bogota Colombia — The economics professor who was chosen as Colombia’s next finance minister says the leftist government that takes office next month will focus on raising taxes on the rich so it can spend more on anti-poverty programs.
But Jose Antonio Ocampo said the administration would respect the central bank’s autonomy and work with rating agencies to restore the nation’s financial health. He added that foreign investment will continue to be welcome in Colombia.
“We want a Western European type of capitalism,” he said. “Not a capitalist system where the distribution of wealth is among the most unequal in the world.”
Ocampo, a Columbia University economist who heads the United Nations Economic Commission for Latin America, was recently asked by leftist President-elect Gustavo Petro to serve as his finance minister when the former guerrilla fighter takes office on Aug. 7.
In an interview with The Associated Press on Tuesday, Ocampo promised that the Petro administration would be fiscally responsible and stay away from radical changes in monetary policy even as it seeks to increase tax revenue.
The new administration will not have a majority in Congress on its own, so Petro is working somewhat successfully to win other parties to support his programs, although he will likely have to compromise.
Ocampo said Petro’s leftist coalition wants to increase tax collections by roughly $11 billion each year through a plan that would increase the nation’s tax revenue by about 25 percent. He said the added funds would go towards building roads in rural areas and implementing education and health programs to reduce social and economic inequalities.
This can be a tough sell. An effort last year by the current government to collect $8 billion in taxes, mostly from the middle class, sparked nearly two months of sometimes violent protests and forced the finance minister to resign. In the end, President Ivan Duque passed a more modest $4 billion tax plan that avoided raising personal income taxes.
Petro hopes to avoid political turmoil by targeting the income of corporations and the nation’s wealthiest individuals.
Ocampo said income taxes would be increased only for the top 1 percent of workers, which in underdeveloped Colombia means anyone making $2,500 a month or more. Petro is also seeking to revoke tax exemptions given to some companies under Duque, and says the wealth tax can be reinstated and that some pensions should be subject to taxes.
Ocampo said he will meet with rating agencies to discuss what Colombia can do to improve its status. Last year, standards & Poor’s and Fitch downgraded Colombia’s bonds to junk status, though Moody’s maintains the nations credit rating above that. That makes borrowing more expensive, with the yield on Colombia’s 10-year government bond jumping to 12 percent from 7 percent in the past year.
The Colombian peso has also weakened, losing 15% of its value against the dollar since Petro’s election victory on June 19. Ocampo said the devaluation was caused by fears of a global recession and interest rate hikes in the United States, which also affected the currencies of other Latin American countries.
The economist added that while the administration will seek to raise taxes, it does not plan to raise revenue by boosting oil exploration. He said fracking would be banned because of its potential negative effects on the environment.
Colombia’s state oil company Ecopetrol is currently running two fracking projects that are in the early stages. Earlier this year, the company said fracking projects could add 400,000 barrels of oil a day to Colombia’s production and provide natural gas supplies for the next 25 years.
Oil is currently Colombia’s leading export. But during the presidential campaign, Petro promised to phase out dependence on oil and turn to cleaner forms of energy. He said he would not approve new exploration contracts as president.
“We will stop depending on oil,” Ocampo said. “But it will also be a gradual process.”
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