Funny Numbers
The new Medium Term Fiscal Framework contained few surprises. The central government’s fiscal deficit for 2017 is still estimated at 3.6% of GDP, in line with the revised fiscal rule target. That’s no mean feat, as a lot has changed this year. First, the economy will grow by less than the government has forecast: it cut its original 2.5% forecast to 2.3%, while most analysts, including at the Central Bank, expect 2% growth at most.
The central government received COLTEL’s savings to finance part of the pension liability, which amounts to COP 2 trillion, and included this above the line as capital revenue. This move is not only bold but irresponsible, as the government still has to pay for COLTEL’s pensions. These sorts of maneuvers have become the norm in Colombia’s fiscal management. That approach depicts an unclear picture of public finances, opening the door to unorthodox practices and obscure policies that undermine fiscal transparency.
Oil and other extractive industries have been very unpopular of late, with community consultation votes overwhelmingly rejecting their presence. While the legal impact of these votes is uncertain, companies might not want to work in places where opposition is so vicious. The ANH is ready to launch 40 exploration blocks for auction, but appetite for these seems questionable. Ecopetrol has already announced that it is ready to start buying reserves abroad, and other oil firms will likely follow suit. The government’s response to the anti-oil and mining votes has been weak, and the government’s unpopularity makes it hard for it to defend oil. But it should. Extractive industries represent more than 50% of exports, and are the main source of foreign currency. Scaring them away seems like a terrible idea.
The only party with enough votes (on paper) to reach the second round of next May’s presidential elections may be the uribusta Centro Democrático. But the party also needs the conservatives to share the governing coalition, and to add 1 million to 2 million votes. That’s why ex-presidents Álvaro Uribe and Andrés Pastrana have joined forces.
The Colombian political system is starting to look more like a parliamentary one, requiring post-electoral coalitions. Walking the tightrope of forming a multi-party coalition to increase the likelihood of a victory, while avoiding infuriating ex and current presidents, may be impossible, and indecisiveness could become corrosive. Possibly only the real political animals - those willing to sacrifice anything -- will prevail. The newcomers will probably have to wait.
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