How can it be the second year of the Petro government? What can you expect?
Essentially, this phase will depend on: 1) what happens in the elections for mayors and governors on October 29; 2) if the economy finally enters a recession, as the Bank of the Republic says, or if, as private analysts expect, the upward phase begins soon; and 3) Petro’s response to the mid-year government crisis that still weighs on his government.
Let us first take what we might call a “good-good” scenario for the opposition. That is, the left loses the elections in the cities where it was strong, such as Bogotá, Cali and Cartagena; and in Medellín and Barranquilla the results correspond to the polls, with victories for Federico Gutiérrez and Álex Char.
Furthermore, the economy is recovering from the growth lull, confidence is beginning to recover, inflation is easing, and the Bank of the Republic is starting to cut its interest rate quickly and sharply sooner rather than later.
This mix would result in Congress, not the administration, defining the reform agenda; That is, what is approved and what is not, as happened in the government of Iván Duque. This transition will not be without drama, as the president will continue to feel that he won the elections and was not allowed to govern, and will continue to insult and blame businessmen, media and parties for what are, in reality, self-inflicted defeats.
In the meantime, the Cortes will be responsible for appointing the Attorney General and appointing five new judges to the Constitutional Court. They have to make important decisions on the development plan, the non-deductibility of royalties and the exotic surcharges for miners and bankers and remain in place as a retaining wall.
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The press and business people, after months of patiently and resignedly enduring the president’s insults, will now have better legitimacy to continue defending the good things of the past, which is no small feat.
In this case, it is possible that moderate versions of pension and health care reform will be adopted, while maintaining mixed, private and public insurance provision; It would be difficult for workers or invasive public service initiatives to thrive (again).
If there is a good outcome (for the opposition), both companies and households will be more relaxed about their economic situation and falling inflation will no longer choke their budgets. Falling bank interest rates will provide businesses with a necessary drop in liquidity and provide an opportunity for credit to return to producers and families, where it can make its impact, increase wealth and improve quality of life.
As the political pendulum begins to move toward the center or center-right, the names of the candidates for the 2026 presidential election will be announced.
Now let’s consider the opposite scenario. The left is winning in Bogotá, Cali and Cartagena, and the economy is falling into recession in the last quarter of this year; or it is even already in a recession, which we will find out when DANE releases third quarter numbers, and which would last until 2024.
Press and business attention will begin to privilege figures with these political tendencies, and their success in 2026 will become a self-fulfilling prediction. Political parties would face the dilemma of accepting some of the government’s most radical intentions on health, pensions and employment issues. And the willingness to invest in Colombia would decrease.
The government believes it is more justified to continue to harass key sectors such as hydrocarbons, EPS, electrification companies, industrialists and bankers. It would remain in the position of showing that the private sector and free markets do not work and bringing about their transition to the public, either through direct intervention, in the case of public services; or through invasive regulations that favor public competitors over private ones. This attitude would worsen the economic outlook.
Based on the perspectives mentioned in the two scenarios, they show that the second year of the Petro administration will be the crucial period in which the extent of its impact on institutions, markets, incentives and disruption of private activities will be defined. Of course, reality finds other grooves than the ones we sketch. Something in between, with mixed nuances, could ultimately happen. This forces us to pay attention to the signs.
As the elections in Spain and Chile showed, anything can happen on October 29, 2023. The government will work hard to promote its candidates and will have enormous logistical power in poor neighborhoods to ensure that the votes reverse the results and the polls’ predictions do not come true.
As Zabala, Vargas Llosa’s character in the novel Conversation in the Cathedral, asked, October’s elections could be the moment Colombia gets screwed.
Unless all sides are covered and containment is strengthened against the intrusive, aggressive and disruptive attitude of the leader, we will enter an even more difficult phase than we have experienced so far.
The chain breaks at the weakest link. What could be the weakest link in the 10 months ending August 7, 2024? The poor voters seduced by the government’s sweets and the pressure of armed groups? Business people and media? The political parties, some liberal, conservative or U-parliamentarians? The judges of the higher courts?
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