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Foreign investors sold about $1 bln of Colombian debt in ‘over-reaction’ -finance minister

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BOGOTA — Foreign investors have sold an estimated $1 billion in Colombian public debt so far in October, Finance Minister Jose Antonio Ocampo said on Thursday, as investors spooked by debate over ambitious tax reform and a cratering peso shifted their funds.

Ocampo labeled the situation an over-reaction, reiterating repeated promises to preserve economic stability, including by reducing the fiscal deficit to a target of 4.3% of gross domestic product.

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“The proportion of TES (Treasury bonds) in foreign hands is 27% or 28% (of the total),” Ocampo told an economic forum. “There have been lots of positive portfolio flows in previous months, in October it will be negative … the outflows in October are like a billion (dollars).”

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Leftist President Gustavo Petro, who took office in August, has pledged to raise an additional 25 trillion pesos ($5 billion) in tax revenue next year through higher taxes on individuals and oil and coal, drawing industry criticism.

Colombia’s peso closed at a record low of 4,904 to the dollar on Thursday, amid market critiques of Petro’s rhetoric and rumors of Ocampo’s possible resignation, which has been denied by the government.

Petro came under fire last week for questioning the central bank’s decision to hike its benchmark rate to 10% and for floating a temporary tax to prevent capital flight.

Ocampo has said high inflation is a supply-side problem that will not be fixed just by hiking interest rates, though he acknowledged at the forum that it would be difficult not to raise costs in tandem with other central banks.

“I think there has been an over-reaction,” Ocampo said. “I want to be very emphatic once again, as I have been nearly every day that I have made comments, that the government has a commitment to macroeconomic stability.”

But analysts said they were betting Ocampo will not stay long and Petro is the true bellwether of what is to come.

“The voice of the president is the one to keep in mind,” said Juan David Ballen, head economist at the Casa de Bolsa brokerage. (Reporting by Nelson Bocanegra; Writing by Julia Symmes Cobb; Editing by Chris Reese and Richard Pullin)

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