Mauricio Cárdenas

Interview

Q/ Sustainable development involves objectives related to economic growth, social inclusion and the protection of nature. These objectives have multiple areas of tension, but there are also promising synergies. In your opinion, what are the most promising policy spaces for leveraging sustainable development synergies in the region?

Well, the key word here is synergy, because there cannot be growth alone, nor can we focus only on the issue of protection and sustainability if we do not improve living conditions. And, on the other hand, perhaps the most important thing for Latin America and the Caribbean is to close gaps, reduce inequality and increase inclusion. So, it is well stated that these three problems need to be solved at the same time, what are the interventions that can help us the most?

Undoubtedly, we have to look for ways to generate resources from our own biodiversity, protecting it and ensuring that these resources reach the most vulnerable sectors of the population. So, what do I imagine? One of those policies that seeks, above all, to improve living conditions in rural areas, where nature is very important, that remunerate these groups of the population that today are among the poorest and most vulnerable. The question is how we manage to bring in the financial capital to invest in this natural capital to protect and generate income that we do not have today. In other words, we have to monetize those natural resources that today do not give us anything, but what they generate from their monetization should reach, above all, the most vulnerable and poorest sectors of the population, which are precisely those who live in those rural areas.

Q/ Public policies to promote development typically have a fiscal impact. Also, some global trends such as aging, climate change and the decarbonization of the economy aggravate fiscal challenges. How to face the challenge that this implies for fiscal sustainability? Do you imagine that deep tax reforms are necessary? What are the key instruments?

One of the great challenges we are going to face in the future in Latin America and the Caribbean, in countries such as Colombia, is precisely to obtain those fiscal resources, because today we have debt -this takes a very important part of fiscal income in interest payments- but there is an enormous, pressing need for more fiscal resources. Without the State we will not be able to prevent pandemics, we will not be able to reduce greenhouse gas emissions or close inequality gaps; without the State it will be very difficult to develop infrastructure and education. So, how do we achieve that, how do we get those resources? The first thing we have to do is to stop spending on activities that do not solve our problems, that do not provide economic growth, that do not generate equity and that do not provide sustainability. We have to rethink spending.

There are many expenditure items that today are superfluous, unnecessary and do not contribute to these objectives. But this requires firmness, will, political capital to make difficult decisions, because behind public spending there is always a sector that wins and will defend it. Secondly, we cannot continue subsidizing activities that generate major sustainability problems, such as, for example, the consumption of fossil fuels. These subsidies are regressive, they go to sectors that do not need them, and they are bad from the point of view of sustainability. We have to ensure that these subsidies, which today demand a lot of resources from the State, are gradually dismantled. And another element here is that we need a taxation that is friendly from the point of view of competitiveness -because if not, businesses will go to other countries-, and that at the same time is progressive. What does this mean? That it should be based more on people, on individuals, on their own economic capacity, and less on companies. We come from models and systems where companies pay most of the taxes. We have to move towards individuals. Companies are neither rich nor poor, those who are rich and poor are individuals and that is where taxation should move.

Q/ Sustainable development demands well-designed and implemented public policies, which in turn requires high State capacities. How do you assess the capacities of national and subnational States in the region and what elements are needed to improve them?

Let’s see, the capabilities of the State have many dimensions. They can be defined in many ways. One is fiscal, which we were already discussing, and is the capacity of the State to have the resources to provide citizens with welfare, public goods and equity. Another is the capacity of the State to enforce the law, the rules, and to ensure that they are complied with. Not only by issuing regulations and decisions -which are a salute to the flag-, but also to ensure that things are actually done. And there is another capacity of the State that is very important in Latin America, and that is to provide security. Without that security, one of the big problems we have is that crime affects everything else. Criminality generates problems of low economic growth, social exclusion and, many times, it goes against environmental sustainability because it threatens our biodiversity; this is the case of illegal mining or drug trafficking, in short.

So we need state capabilities on all these fronts, but that requires us to be aware that we have to invest in them. These do not arise spontaneously, they are deliberate decisions. Society has to dedicate part of its resources to build that capacity, to have a better bureaucracy, to have a more efficient and professional judicial branch, and at the same time to have a greater fiscal capacity. So, it is necessary to invest. And that decision can only be taken as part of an agreement, of a pact between different parties, between people from the right and the left who say «it is in the interest of all of us to have more state capacities» because that is independent of the party that at one time or another is governing. It is a deliberate decision to invest in the state.

Something that I believe is behind this, of being able to build the puzzle of state capabilities, is that we must be aware that this is not done overnight, that it will require a long and continuous effort to develop these state capabilities. So, the truth is that it is a development agenda, but here we have tended to see the State as something residual and where the same standards and demands that are applied in many private sector companies when it comes to choosing the people who work, when it comes to having filters, are not applied. There is a lot of politics behind the way in which the State has been built. And I have an aspiration, and that is that artificial intelligence, which today is seen with much concern and some apprehension in the world, comes to give us a hand to build those state capacities, because with artificial intelligence we will be able to improve the efficiency of justice, we will avoid tax evasion, we will improve the quality of education. For us, artificial intelligence can be more of an opportunity than a threat. I am optimistic about that.

Q/ In some sectors, the technical recommendations to solve the pending challenges are more or less clear, but there is a lack of action in our governments to the extent that medium and long term agreements and political commitments are needed. How can we move forward with the pending reforms in a context where the political economy of the reforms limits action?

Another way of saying this is that polarization has done us a lot of harm, because there is no scenario, no context for the agreements that societies require, which are easier to achieve when positions are moderate, pragmatic, realistic, where politicians understand that there are decisions that have long-term impacts and benefits. So polarization has done us a lot of harm. What do we have to do? Depolarize. We have to move to a political system where, above all, that pragmatic, evidence-based vision is rewarded, where it is possible to reach agreements, where people are not so much defined by radical, extreme visions, but because they consider that there are common purposes that unite societies. But, obviously, this is difficult, because today in the world there is a great absence of policies that could be said to bring together, to unite. There is more of that policy of striking, strident and emotional speeches, but we have to give emotion to the moderation of policies in the middle, of agreements, of understanding. We have to say that what is really exciting should be that countries can progress and that agreements and consensus can be reached. No more of this politics of spectacle that is confused between media shows and what should really be the exercise of politics, which is to help people to improve their living conditions. We must try to find that point where we can all reach basic consensus.

Q/ Considering the two central pillars of energy mitigation, green electrification, increasing the electrification rate, penetration of non-conventional renewable sources and adoption of sustainable fuels, what do you consider to be the main challenges to promote their adoption and what are the most powerful instruments to accelerate the electrification of consumption, green generation and the adoption of sustainable fuels?

We must begin by saying that Latin America and the Caribbean are in a privileged position in the world with respect to electric energy and, above all, to clean electric energy from renewable sources. We have this great asset and we should take advantage of it. Given that we are capable, we could offer products from agriculture and industry with a low carbon footprint because our electrical energy is clean, but we have to decarbonize even more. We still use a lot of fossil fuels, for example, for transportation. So we can move to electrification of transportation and for us in Latin America it would be a great benefit

How can we do that? What needs to be done? Well, essentially, we have to electrify public transportation, but also an important part of our industry. We have to look for mechanisms to make electric power the source of energy in many of the activities where today we continue to use fossil fuels. And a central chapter in Latin America and the Caribbean is agriculture. We can offer more agricultural products, food for the world, be its pantry with products that have a low carbon footprint. That means greatly improving the use of agrochemicals, fertilizers, manures, pesticides. That’s where we have to make a big change to reduce the use of fossil fuels. But if you ask me, Latin America’s great contribution to global decarbonization is in reducing deforestation. That is the first step

We have to stop destroying our biodiversity, protect it and make the world pay for it, because those environmental services will be useful for everyone. Because one hectare protected with forests, with jungles in Latin America, is a hectare that is going to help the whole world to maintain a dynamic economic activity and conditions where we do not have to stop the global economy due to decarbonization. The fact that Latin America can decarbonize the world by capturing these greenhouse gases will be a great opportunity from the economic point of view, and we have to see how we are going to take advantage of it.

Q/ What is your view on the role of natural gas in the energy transition in the region and the world? How do you assess the risks of promoting natural gas and its impact on increased oil production and dependence on oil due to the associated fields and the link between the oil and gas value chains? What elements must be taken into account to ensure that the integration of natural gas in the energy strategy is compatible with long-term decarbonization, i.e. to limit the lock-in effect?

Let’s see, Latin America and the Caribbean is a region that we could not say is particularly rich in natural gas. There are countries that have natural gas such as: Argentina; Peru; and Colombia, which more or less maintains its self-sufficiency; Trinidad and Tobago and Venezuela are countries that have a lot of natural gas. Brazil is now increasing its production, although it is still an importer. The bulk of Latin America and the Caribbean imports natural gas. So, for the importers, dismantling those imports and moving to electrification of the economies as quickly as possible is desirable. And for the countries that have natural gas, there is obviously an opportunity to reduce the use of oil and coal, concentrating more on the natural gas they have. Argentina, Colombia, Peru and Brazil should take advantage of it to the extent that they have more capacity to produce it, in order to reduce the consumption of liquid fossil fuels and, in time, move towards electrification. But for these countries that have natural gas, the important thing is that they give us time while we move towards electrification. It is a transition fossil fuel, but it makes the transition smoother, less costly and above all, it allows the economy to adjust and accommodate, so that it is not a sudden stop, a dry stop, where we are simply going to stop consuming fossil fuels from one day to the next, but we can continue consuming natural gas. That is why I am very much in line with the idea that countries have to continue looking for natural gas and have to build the necessary infrastructure, as in Argentina, to be able to consume that natural gas and replace imports. The main thing is to replace natural gas imports.

Q/ So, the region is lagging behind in terms of infrastructure, including key infrastructure for trade and telecommunications. What institutional factors limit the expansion of infrastructure and the proper maintenance of existing infrastructure? How can we close this infrastructure gap?

This is one of the great problems that Latin America has. The region is very homogeneous, very compact because of its culture, its history, its language, its customs. In other words, Latin America really has many elements that unite it, but there is much that divides it and it is precisely the lack of connectivity between countries. This is a region where trade among countries is very low compared to Asia or Europe; we do not trade among ourselves and that is one of our great economic weaknesses. And, by the way, that is what has also led us to depend so much on primary products from our countries to the rest of the world, but there is no trade among ourselves -in industry, in agricultural products-. It is very precarious, and that is largely due to the fact that there is no good infrastructure connecting us.

Therefore, one of the great problems we have, and precisely one of the great challenges, is to build this infrastructure for trade, because it is the one that will provide us with economic opportunities in the future. Until now it has been very difficult to build it. Each country gives priority to an infrastructure looking inward, to its needs, to connect its population centers in the interior of the country or its country with the ports, but we have to give it a priority and that is where multilateral organizations play a fundamental role, because they are the ones that can really articulate the needs of several countries. And here I am talking not only about roads, but also about connectivity infrastructure, for example, in areas such as electric energy, so that we can move it from one country to another. Colombia is a country particularly rich in electric energy – it has the rivers, it has the sun, it has the winds – but there are other countries in the region that do not have the same conditions. We could be exchanging electrical energy. So, infrastructure for greater connectivity, greater integration between our countries is the priority and that is the big bet for the next fifty years. If we do not do that, Latin America will never really be able to overcome its development problems.

Q/ Mitigation of emissions from the energy sector often involves an asymmetry of costs and benefits. While the climate benefits of mitigation are global, the most visible costs are local, such as the impacts of mining and transmission infrastructure. What do you see as the best mechanisms to overcome these barriers and how to improve the balance for local communities?

Decarbonization requires infrastructure and minerals; otherwise, there is no solar or wind energy and we will not be able to develop, for example, green hydrogen. We need that infrastructure and minerals, which are generally known as critical minerals. If we’re going to solve the emissions problem, that’s say, if we’re going to be successful in mitigation, we’re going to have to develop those minerals and build that infrastructure. And that affects a lot of local communities that are in the areas where that infrastructure is going to be built and where those minerals are found. So those communities have to gain, and the gain has to be in employment, in income, but also in quality of life. Part of the exercise here is to make sure that there are equitable conditions so that the development of these projects really brings welfare and benefits to these communities. We will be rendering a great service to humanity, because if we reduce emissions, the whole world wins.

We must also seek compensation, co-responsibility. We are not the ones who caused the problem of global warming, we are not the ones who caused the emissions that have generated the problem of climate change. So, if we are going to be part of the solution, we also need compensation. And that is why part of what we do here must be compensated with resources that come from the economies of the North. This is a basic criterion of equity and justice in environmental matters.

Q/ Last question. New technologies can improve the fiscal situation by increasing the effectiveness of the state, control and efficiency of spending, but they can also erode it, for example through remote work and unrecorded cross-border digital transfers. However, it can also erode it, for example, through remote work and unregistered cross-border digital transfers. How do you assess this balance and the challenges posed by technology for an effective and equitable tax administration?

Technology is going to offer us tools that we do not know about, that we have not fully adopted in our countries, but that are going to be fundamental to improve the efficiency of the State, to increase tax collection. These technologies are really going to be very useful in giving us a great qualitative leap in the way the State operates.

I believe much more in the positive view than in the negative view that it will be easier to hide transactions or that people will go and work elsewhere and then they will not comply with their tax obligations. On the contrary, I believe that technology will allow people to develop their activities from their countries, but for a global market. So, instead of emigrating to try to provide a service in another country, where the person will earn more, but it will cost him/her much more to live, the optimal world, the ideal world is that he/she can continue doing that work from our countries, but generating an income that will be global, that comes from international sources.

That would be the ideal world, where we can continue from Latin America offering services for a global market, paid from abroad, but keeping our costs of living here, which are lower. So that would eliminate, for example, the incentives for migration, because it would be easier and more profitable for people to work from here and provide those services abroad. We have to educate ourselves for this. That requires more bilingualism, to have access precisely to the knowledge of these technologies; that is the future. The future is the world that will come to buy services here; we will not have to export labor, but rather export the content of that labor translated into goods and services.