Uribe vs. the Supreme Court, FARC 2.0 & growth
At the Supreme Court a case against ex-president Álvaro Uribe for witness tampering is filled with intrigue, secret tapes, betrayal and revanche. To add insult to injury, the Supreme Court was found to have wiretapped Uribe. This is likely to be a political trial, in which whatever the Supreme Court deems the truth may be seen through the lens of party interests and old grievances. But any ruling – especially one finding Uribe culpable -- would have grave repercussions.
It’s hard to predict what could happen in Colombia if Uribe were to be jailed. Leftist politicians, the Venezuelan government and ex-president Juan Manuel Santos would probably rejoice. But as Uribe is the backbone of the Duque administration, such an outcome would be catastrophic for governability, with serious effects on peace, security and the rule of law. The timing could not be worse.
FARC 1.0 got convinced that they could not defeat the Colombian Government, and instead were an impediment for a leftist democratic victory in Colombia. Despite Iván Márquez and Jesús Santrich were part of the peace negotiating team in Havana, is of common knowledge that, once in civil life, they kept an illegal business organization alive (coca plantations, laboratories, links with Mexican cartels). Now these two leaders created FARC 2.0 with the excuse that Colombian Government supposedly did not fulfill the promises protocolized in the peace agreement. FARC 1.0 has condemned the move of its former comrades, and vowed to stick to their promises of civility and democracy.
Our view of Colombian growth leaves aside any hope of reaching the desired 3.6% growth rate for 2019; uncertainty for future years is high. Certainly, hopes for growth at nearly 4% after 2020 seem too optimistic. If tradable sectors continue to perform poorly, our outlook will turn even more negative: growing on the back of non-tradables, which turns us into a Latin-American Tibet of sorts, is definitely not the way to go. Colombia’s current fragile fiscal situation could harm growth over the medium term.
There are 24 lawsuits against the recent Carrasquilla tax reform. Three of them aim to overturn the financing law altogether based on procedural flaws. Basically, the questions are whether the House of representatives knew the text approved in the Senate before voting on it; and whether they had time to actually discuss it.
The biggest impact would not be in 2019 but in the upcoming years. Any success of such suits would put Colombia on a tough path ahead. In the past the Constitutional Court has acted responsibly in this type of episodes. Either siding with congress in cases of doubt; or, if worse comes to worst, giving government enough time to pass another reform. We think that the most likely scenario is that the court invalidates some of the articles, but not the entire financing law. The motivation of some challengers is purely political, trying to undermine minister Carrasquilla and weaken government’s standing to force it to negotiate.
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