Cartagena (Colombia), June 5 (EFE).- Colombia needs to increase investment as a necessary condition to reduce poverty and promote the country’s social development, the president of BBVA Colombia, Mario Pardo Bayona, warned this Wednesday.
“In a country like Colombia we will only be able to eliminate poverty if we manage to accelerate economic growth,” he said at the opening of the 58th Banking Convention being held in Cartagena de Indias.
Pardo Bayona, who is also president of the board of directors of the Colombian Banking Association (Asobancaria), pointed out that this is why the financial sector, the banking sector and the public must work on an economic reactivation agenda.
“This country has great strengths but it also has a great weakness, which is the low level of investment,” he stressed.
The investment rate in Colombia in 2023 fell by 24.8% compared to 2022, which impacted economic growth, which last year was only 0.6%, lower than expected by economic organizations and by the financial market.
“Although it is not a sufficient condition, investment is the most necessary condition for the economic and social development of a country. There is nothing that individually has a greater impact on the social development of a country like Colombia than private investment,” he added. .
For this reason, Pardo Bayona regretted that Colombia has very low investment levels, lower than those of any region in the world.
Low savings and capital flight
The president of BBVA Colombia explained the reasons for this situation as the country’s low level of savings – both in families, companies and in the public sector – which is approximately half that of Latin America, and “a high level of consumption that as a percentage of the national economy it is higher than in any region of the world.
“The high appetite for consumption can also be seen in the weight of the financial sector’s consumer portfolio, which is one of the highest in Latin America and the Western Hemisphere,” he added.
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Pardo Bayona also pointed out that, in the case of Colombia, an important part of the savings is not productive, which serves to finance investment since it moves as cash and does not enter the financial sector.
“Cash represents 14% of the monetary mass, that is, more than 100 trillion pesos (about 25,490 million dollars / 23,460 million euros) that are not productive, and cash transactions represent 78% of transactions” , he indicated.
According to Pardo Bayona, the high use of cash also produces “additional problems” such as, for example, “corruption, financing of illicit activities and low tax collection.”
He also pointed out that productive investment is also affected by the fact that a part of the formal savings leaves the country and the opportunity to finance internal investment with those resources is lost.
“Colombians, at the end of 2023, had $256 billion in assets abroad, equivalent to 72% of GDP or 160% of the deposits of the financial system,” revealed Pardo Bayona.
That is why he summarized: “If this savings, instead of leaving the country, were invested to a greater extent in Colombia, we would have many more deposits, much more investment, much more GDP and greater social development.”
(c) EFE Agency
