Gustavo Petro, president of Colombia, directly questioned the foundations of the traditional economy and the interest rate policy in force in the country.
Among his proposals, he raised the possible elimination of tariffs on cement and the review of subsidies and taxation for those who rent high-value properties, arguments that have generated strong controversy in the economic and political sectors.
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“The theory of expectations in economics is not scientific,” said the president when referring to the predominant orthodox model. In his opinion, traditional economics “constructs an ideal economic subject that does not exist, the so-called ‘homo economicus’, completely rational and knowledgeable of all market information and who has the gift of rational expectations in economics and can predetermine economic behavior. Nonsense! That does not exist”.
To support his rejection of that abstract vision, the president noted: “These are stories for mathematicians deluded by computer numbers.”
Petro defended an empirical vision of Colombia’s economy. He argued that the true economy is built in the daily reality of markets and production.
“The economy is in the streets and in the production of merchandise that forges prices,” He stressed, and considered direct experience indispensable: “The scientific economist must get up early, shake off his comfort and go to San Victorino or Corabastos or Hueco de Medellín, and even get drunk with the workers in a store and he will know that if he allows a lot of meat to be exported then prices rise, if a lot of water falls and the rice and cassava crops drown, prices rise.
The current interest rate policy was also rejected. Petro maintained: “Almost the only country in the world that raises the interest rate is Colombia, and it is a capital nonsense of some gentlemen and ladies who believe that in this way they will be able to defeat the aspirational force of the Colombian people for progress.” He used a familiar expression to emphasize his point: “Old cows crossed, as my mother used to say.”
In the president’s opinion, Colombia’s isolation in the management of the interest rate encourages speculation and benefits financial actors, to the detriment of the general interest. “If Colombia raises its interest rate against the world, it will be filled with speculators and pirates and fatten parasites of the state so that all the people pay them”he declared.
The president linked these effects to the situation in the housing and construction market: “That is the dilemma of the president or manager of Argos, who knows that he does not sell as much cement because houses are not being built, because people do not buy houses at a high interest rate, people already know what happened with Upac and how many people committed suicide because they could not pay the installments on their houses that were actually from the bank, and then he deceives the people by saying that there is no house because there are no subsidies from the state.”.
He expanded his argument about the financial dynamics of subsidies and loans for housing: “How can you imagine, if we deliver subsidies, they are stored in a Bancolombia bank trust because few will demand the loans. A subsidy in the midst of high interest rates is a subsidy to the bankers.”
In his criticism of the relationship between large companies and the national financial sector, Petro pointed out: “The CEO of Argos does not mention that among the owners of Argos is Bancolombia and that Bancolombia earns more from high interest rates than from the sale of cement.”
Faced with this scenario, he proposed specific alternatives: “That is why I am thinking about removing tariffs on cement so that it becomes cheaper in Colombia, and I am thinking that it is the State that should begin to help improve the housing of Colombians.”
Regarding the rental market, the president identified the impact of the cost of money on leases and agricultural competitiveness: “And I am thinking that if the interest rate rises, rents will rise and that high land rents do not allow us to competitively export our agricultural products.”.
He pointed out possible forms of control: “To lower rents, either the interest rate must be lowered or a tax must be imposed on landlords with high wealth levels so that rents can be lowered, according to Ricardo’s theory of income.”
In another section of his statement, Petro criticized opposition political leaders and the influence of ideological positions on public decisions: “There are like Vargas Lleras, Cardenas and Santos, who believed that if the underground metro in Bogotá was not built then Petro would not be president. Petro was president but they destroyed the city of Bogotá out of pure political hatred”.
According to the president, business and political sectors would seek to stop any progressive advance, even at the expense of economic development. “This is what they want to do with the economy and businessmen, ruin them as long as there is not a second progressive term that helps workers and working women,” he warned.
For Petro, these positions arise from political and emotional motivations rather than from technical analysis, which, according to his approach, hinders the advancement of projects with social and economic impact.
