Colombia braces for historic change with Petro as president

Bloomberg

Colombia is bracing for the prospect of a radical change in economic and political direction after electing a former guerrilla to the presidency on a platform of transforming the country’s business-friendly model.
Gustavo Petro, 62, defeated construction magnate Rodolfo Hernandez in Sunday’s runoff vote, giving him a shot at enacting a program that includes plans to tax big landowners, halt the awarding of oil exploration licenses and revive ties with the socialist government of neighboring Venezuela.
“It’s historic,” said Silvana Amaya, an analyst at Control Risks consultancy in Bogota. “Colombia has traditionally voted very conservative. This marks a big change, a move to a very different economic model.”
Petro took 50.4% to 47.3% for Hernandez, according to Colombia’s election authorities. He assumes office on August 7 along with his running mate, Francia Marquez, a 40-year-old environmental activist who will become the country’s first Afro-Colombian vice president.
“Real change is coming,” Petro said in a victory speech in Bogota. “This is another Colombia.”
Other major Latin American nations including Brazil, Mexico, Argentina and Venezuela have all elected leftist leaders at various times, but Colombia has until now only ever been governed by conservatives and liberals. Petro’s election is also likely to shake up relations with Washington in a country that has for decades been the region’s strongest US ally.

Investor concern
He is mistrusted by many investors, especially since his plan to gradually phase out oil and coal would deprive the nation of about half of its export revenue. On top of reforming the pension and health-care systems, Petro also wants to protect local farmers and industry using import tariffs, and renegotiate trade agreements, a radical shift for a country that has liberalized commerce in recent decades.
But it is unclear how much of his agenda he’ll be able to implement given that he and his allies lack a majority in congress.
His coalition controls 27% of seats in congress, while some 57% belong to market-friendly parties that endorsed a conservative candidate who lost in the first round and an additional 9% are from the Green Party, according to Banco BTG Pactual SA analysts Daniel Guardiola, Alonso Aramburu and Daniel Callamand.
“Petro’s agenda seems ambitious as it seeks to reform the main pillars Colombia was built upon,” the analysts wrote in a research note. “Although some proposals are more radical than others, we believe there will be a degree of moderation, as a divided Congress with a majority from ‘pro-market’ parties will provide checks and balances against radical proposals.”
Other institutions that will provide a backstop: The constitutional court may block some of his plans, while the central bank’s independence is enshrined in the constitution. He reached out to centrists during the latter stage of the campaign, alleviating some market fears.
Investors will be watching for guidance on who is appointed to the Finance Ministry and the rest of his economic team, according to Ana Vera, chief economist at Panama-based IN ON Capital.
“We expect more volatility in local markets and the weakening trend of the peso would continue,” she added.

Demanding change
Colombia now joins the ranks of nations worldwide that have voted in anti-establishment leaders. In Latin America, the demand for an alternative resonated as the pandemic caused a spike in poverty that’s been compounded by inflation at multi-year highs. In Peru, a school teacher from a Marxist party became president, while Chile elected a former student protest leader earlier this year.