While I have only been loosely following markets over the last three weeks, after all in the short term it is all just noise, my three weeks in Colombia have provided me with new perspectives and insights that I look forward to sharing on my blog over the coming weeks.
Many people will have little interest in the economic fortunes of Colombia. However, anyone invested in the MSCI Emerging Markets Index, of which almost all portfolios now have an allocation, will be invested in Colombian equities. Reflecting on this dynamic, it raises questions about the passive nature of capital – whereby small shareholders have little say in how companies are run – that forms the basis of the economic model we all operate within.
During my trip I met with officials from Colombia’s Finance Ministry, hearing their latest presentation on “Colombia’s economic strategy in the new global context”, after which I put various questions to them on Colombia as a place to invest, their current economic challenges and the policy decisions of their authorities. It was an interesting meeting, adding further colour to my picture developed from experiencing the country, meeting and speaking with locals.
What I found unnerving is just how similar the Colombian officials sounded to our own officials. The fall in oil price revenues has prompted an austerity budget, only they call it “Intelligent Austerity”. I am sure Michael Noonan would be disappointed someone at the Finance Department failed to latch on to that term. On tax reform, Colombian officials are concerned with “broadening the tax base”, while at the same time they want to “redistribute the tax burden” from corporates to people. Speaking to locals, they are already paying high taxes, but the issue is that they are not getting anything in return. High taxes but poor social services. Sound familiar?
Like Ireland, Colombia is operating under an economic model that measures development in one way. The real challenge is finding an economic model that fosters growth but allows for a greater percentage of a population to participate in that growth, with a more equal distribution of wealth. It is not going to happen when everyone is thinking the same way. The rise of Bernie Sanders in the United States, a country that has defined the framework we operate within, is perhaps a sign that people have had enough and are in search of a better system.
Even at home, Enda Kenny and his Fine Gael/Labour government learned first-hand that presiding over the fastest growing economy in Europe is not enough. Their failure to be re-elected despite the strong headline numbers reflects the reality that not everyone has benefited in the economic recovery, what many believe has been an unequal recovery. At the same time, the stalemate in terms of electing the next government reflects an electorate unsure of who to believe in to build a better, fairer society.