Reasons to be pessimistic
Colombia’s Fuel Price Stabilization Fund deficit is projected to reach nearly 3% of GDP in 2021-2022, with a peak annualized deficit of COP 26.1 trillion this year. The Autonomous Committee of the Fiscal Rule published an analysis that is both timely and courageous: it warns that structural solutions are required, adjustment mechanisms should be symmetrically applied, perennial deficits should be avoided, focalized subsidies should be considered, temporary fiscal ceilings to this subsidy should be explicit and that the public should be told of the foregone social spending resulting from subsidizing gasoline and diesel. But a solution hasn’t yet been presented. The government promises a roadmap in June. This is, to some extent, understandable from a political standpoint, as the May 29th presidential election looms large, and the government wants to avoid earlier unpopular announcements. Yet this vagueness is highly irresponsible, given the magnitude of the effects involved.
Why do Colombians find the current national situation so unbearable that they may choose Gustavo Petro as their next president? Is the economy not growing above that of Colombia’s Latin American neighbors? Was the pandemic not reasonably managed? What is so out of control? Why may voters be willing to pay a possibly high price in economic distress, instability and political mismanagement, for the sake of change? To answer these questions, we need to realize that people have been steadily complaining about three things: 1) insecurity and crime; 2) corruption; and 3) poverty and hunger. Ordinary Colombians seem prone to giving Petro the opportunity to improve conditions in these areas, by adopting risky reforms, and challenging the political management of the last 20 years.
The 2021 Colombian economic rebound was remarkable, by far exceeding post-pandemic expectations. But sustaining high growth is a different challenge: this month’s IMF-WEO forecasts see Colombian growth falling below 4% in 2023, a widely-shared outlook. Social discontent still looms large, even if hard data is starting to point in the right direction.
Petro seems to have taken the lead in April, with his support still fluctuating around 34%-36%, while Fico seems to have hit a glass ceiling at around 25%. Fajardo and Hernandez are fighting for third place, each with around 10%. Newcomers have grasped voters’ imaginations – as presidential election results in Chile and Peru show -- presenting prospects for change. The remaining month of campaigning will require a second push from Fico, if he is to win the run-off. May 29th elections seem to be decided in favor of Petro. June 19th is still too close to call.
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