Duque, the Freshman

COLOMBIA - Report 03 May 2019 by Juan Carlos Echeverry, Andres Escobar and Mauricio Santa Maria

The corruption scandals surrounding Ruta del Sol II have created all sorts of problems for the unrelated fourth generation (4G) program. The most important was the realization that, when nullifying a contract due to a concessionaire’s proven corruption, the rules applicable to companies providing goods, services and financing in good faith were unclear. Good-faith players were exposed to a substantial risk of not being repaid. A judge’s 2018 solution to the problem has now been challenged on constitutional grounds, leaving the Constitutional Court holding a hot potato. The public wants to see those involved in corrupt practices wiped from the face of the earth. Many in the political milieu are also calling for slates to be wiped clean, even if that means throwing those acting in good faith into the flames. But if the good guys suffer financial punishments equal to the bad, funding for 4G could come to a grinding halt.

That would push infrastructure-building costs higher, either due to heightened risk, or because the government will feel pressure to put more money into such projects – which would add to Colombia’s fiscal woes. Let us hope the Court makes a Solomonic decision.

Colombians are learning to live with a president who is not fully a president, has a weak inner circle and is supported by a feeble and fractured congressional coalition.Iván Duque could still end up doing more good than harm. He gives the appearance of being enrolled in a college program to learn how to be president (he’s a freshman). That may not be as bad as some say, if he lets the country work, while learning to lead it.

Ex-Corficolombiana CEO José Elías Melo has been convicted of corruption charges related to the Odebrecht part of the Ruta del Sol, a 1,000 km highway connecting Bogotá with the Caribbean. He was sentenced to 11 years in prison. Corficolombiano is the investment bank of Grupo Aval, the largest Colombian economic group. These events shocked the Colombian economic establishment. While Grupo Aval is not under scrutiny, and its governance structures are solid and well supervised, the Melo conviction will certainly increase uncertainty.

Six days before the deadline for the Duque administration’s National Development Plan (PND) to be approved by Congress, everything seems to suggest another hard blow for the government. This again underscores the severe lack of governability in Congress. Two things stand out. First, what’s left of this plan seems mostly bad or fuzzy; the good initial proposals, except for the one related to health, have all disappeared. Instead, we have the Orange Economy, and more taxes to subsidize inefficiencies. Second, the government’s political clout is even weaker than we thought. Something will have to be done soon – or it’s possible that nothing of real importance will be accomplished for the next three years.

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