The day after: after the election of Gustavo Petro, the Colombian Stock Exchange registered a drop of 3.82%

Last Sunday, Gustavo Petro was elected the new president of Colombia and thus Colombian citizens joined the Latin American trend by deciding on a left-wing leader, said Jackeline Piraján, economist at Scotiabank Colpatria (a subsidiary company of Banco Colpatria, of the Scotiabank Group).

Piraján explained that, facing the financial marketsvolatility was likely to increase in yesterday’s trading day given that both Colombia as the United States returned from a holiday.

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Thus, the Stock Exchange Colombia closed down and COLCAP (the main indicator of the Colombian stock market made up of 20 issuers and 25 most liquid shares) registered a fall of 3.82%. The shares of Ecopetrol (the largest company in Colombia and one of the main energy groups in Latin America) registered the greatest setback, losing 11.9% yesterday. While the dollar achieved a price of 4,022.5 Colombian pesos, 117 pesos above the Representative Market Rate (TRM) set for yesterday at 3,905.05; and 118 pesos more than that reached at the end of the day last Friday, when it closed at 3,904.99 Colombian pesos.

According to the Scotiabank Colpatria representative, is key to Colombia seek a tax reform and consensus for it. However, even in a positive medium-term scenario, they do not expect the exchange rate to drop much more than 3,750 Colombian pesos because the context of higher rates at the international level generates a global strengthening of the dollar..

Hugo Perea, chief economist of the BBVA Research, explained that it was not ruled out that the markets woke up on Tuesday with many ‘tradings’ of Colombian assets within a context of uncertainty until the course of the new government is a little clearer.

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“The nomination of the finance minister will be key to knowing if he will continue with the rhetoric that the markets have been understood as anti-company and other announcements that generate uncertainty and make investors take defensive positions”said.

for Perea there is an expectant situation, because the markets They are evaluating what was declared in the campaign and what could be executed, given the institutional aspects that will force the new government to negotiate and, eventually, set aside or moderate some of the most controversial advertisements that it offered during the campaign..

“The institutional balances are working, which reduces the possibility of radical changes. The president-elect did not get absolute control of Congress and has a representation of 20%, so he will have to negotiate and forget about some of his most controversial proposals “Perea considered.

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Proposals

Among the economic proposals of the president-elect are: declare an economic emergency, make changes to the pension system, carry out a tax reform, implement measures to stop imports to protect the national textile industry, stop new oil explorations to carry out Colombia to an energy transition, among others.

Likewise, Perea explained that among the most outstanding measures are the increase in tax collection by five percentage points, something very ambitious that goes against the purpose of limiting investment in exploration in energy issues and generating less dependence on oil. And it is that, this last activity is one of the ones that generates the most fiscal resources for the country.

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For his part, Luis Miguel Castilla, former Minister of Economy and Finance, explained that many of the president-elect’s proposals have to do with an expansion of public spending and the construction of a broader welfare state that will demand tax revenues that Colombia does not have.

In addition, Castilla said, Colombian energy policy is one in which renewable energy sources are privileged.

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“It will be quite challenging for the new government to be able to meet many of these expectations because they have a much weaker fiscal situation and because carrying out tax reforms has not been easy for them”I note.

Thus, the three most complicated factors, in addition to risk aversion and capital outflows that are likely to occur in Colombia as happened in Peru last year, are: the fiscal issue, how the promises of a cleaner energy matrix will be fulfilled by cutting dependence on oil, and the protectionist policies of increasing tariffs to protect some national sectors, which will against the opening that always showed ColombiaCastilla pointed out.

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Commercial relationship with Peru

Asked how the economic relationship between the two countries could develop, Perea pointed out that beyond the political bias, the treaties signed via the Pacific alliance (AP) maintain a free trade area.

“We have seen that during the campaign the president-elect announced raising the tariffs on certain products and hopefully he stays within the parameters and guidelines that have been given in the AP. It is part of the uncertainty at the moment and we hope that this will be clarified with the first concrete messages that he gives “said.

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Likewise, Castilla noted that the new government could also choose to be pragmatic and not affect the Andean Community, which is more in tune with Colombian foreign policy. Along these lines, the coffee country could give less political weight to the Pacific Alliance.

It should be noted that the change in the Agrarian Promotion Law in Peru prompted local agro-exporters to expand in countries such as ColombiaMexico and Brazil.

On this, Castilla pointed out that the regulatory changes that could occur could be a factor that affects Peruvian investment in Colombia considering that the greatest growth of this has come from the agro-industrial sector. Although there are investment protection agreements, the eventual impact could be due to the type of regulatory changes.

Source: Elcomercio

Ronald Payne

I, Ronald Payne, am a journalist and author who dedicated his life to telling the stories that need to be said. I have over 7 years of experience as a reporter and editor, covering everything from politics to business to crime.