What Jumps Out: Musings About Colombia’s Local Elections and Context Regarding the Rebuke of President Petro

I’ve held off writing anything about Sunday’s elections until now to try and get a feel for where we are. Well, I’ve had a feel and here are a few balanced musings.

Photo: Colombian President Gustavo Petro. (Credit: World Economic Forum / Boris Baldinger)

As expected, the results being a “Slap in the face for President Petro” was the narrative the press went for. But this perhaps needs a little context.

Local elections always fall a year after president elections. And, every time, there is a rejection of the incumbent.

• In Barranquilla, the Char family remain in power, largely in a political world of their own.
• In Cali and Bogotá, the center has been replaced, respectively, by an independent, Alejandro Éder, who looks excellent, and Carlos Fernando Galán, the new liberal, who defeated the almost unelectable Gustavo Bolivar of President Gustavo Petro’s party. Note, however, that at city council level, the political balance is little changed.
• In Medellín, (the hotbed of the right) we have the return of Fico who is the only real big winner from the Conservative Right — because Quintero, a Petro ally, has done such an abysmal job.

Nonetheless, the regional political landscape has shifted, but what does that actually mean?

According to J.P. Morgan, this was a rejection of Petro presidency and strong statement that the coalition has problems. That is clear for all to see. Where they are a little off — or a lot off — is suggesting that this will impact the reform process. There is NO impact.

Why? Because Petro never had the votes in Congress to begin with, and the reforms were always going to be less radical than the opposition press and politicians were suggesting.

Thoughts on Economics and Reforms After the Election

The Colombian bond market saw a surge and the dollar closed 1.27% stronger to hit 4,062 Colombian pesos of the US dollar — both due to the lower country risk perception post election.

With all of the above I offer this: Financial strategists and analysts are always right. If they are wrong, well, it’s because of something that has changed in a Black Swan manner.

With Colombia, starting from August 2022, they called it wrong and drove the peso and country risk sky high. They suggested Petro would bankrupt Colombia with reforms, close down the oil industry, and offer up the country to Moscow or Beijing at the first opportunity.

They failed to look at the structure of Congress, lacked faith in the institutions, and listened to the warped local press. And they cost a lot of investors a lot of money.

Has Petro knocked it out of the park? Not at all. A first base hit at best. But he has overseen a debt reduction and phased out ridiculous fuel subsidies imposed years ago while witnessing an increase in oil production and the lowest urban unemployment number on record last month. Country risk, the bond market, and the peso should never have moved as they did.

Sunday will have been a timely reminder to Petro about his humility level. But, there again, he is a politician — so that won’t last long.

The reform process WILL continue as before, with 50% of the bills negotiated away.

And, trust me, all areas being discussed need “a” reform.

Colombia doesn’t have the luxury of being perfect.

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