NEW YORK (Reuters) – Colombia is drawing up plans to hedge against declines in the price of crude, its main export, the country’s finance minister said on Friday, following in the footsteps of Mexico, which successfully used one during the 2014-2016 price slump.
Mauricio Cardenas said “it is the right time” for Colombia to start thinking about implementing an oil hedge for the first time, adding that the country would need to reshape its legal framework to allow the government to lead a potentially risky financial transaction.
Colombia - Something - Mexico - Cardenas - Reuters
“Colombia needs to do something like what Mexico has (done),” Cardenas told Reuters in an interview in New York. “As oil prices recover and seem to be higher now than what they probably will be in the long term, this would be the right time to hedge.”
Colombia once earned roughly a fifth of its national income from oil revenues, royalties and taxation, but that figure fell to nearly zero during the global decline in crude prices in 2014.
Country - Laws - Liability - Officials - Hedges
The country would need to change its laws to remove liability from public officials as they carry out those hedges, which could run into controversy in Congress, especially in an election year.
Colombians will elect a new Congress in March and a four-year president in May. President Juan Manuel Santos is serving his second term and is not allowed to run again.
Cardenas - Creation - Framework - Future
Cardenas said he wants to start the creation of a legal framework “so that in the future...
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