What Jumps Out: Turmoil

Put simply, Colombia is in trouble. Not economically, but politically, there is a total breakdown in corridors of power, and a vacuum where consolidation and understanding should exist.

At the very center is the labor reform. Due to the senate’s rejection of the referendum, Gustavo Petro is threatening to impose the plebiscite via decree. The rabid right/elite are furious at the government circumventing the democratic process and the country’s institutions. Will Petro succeed? Can he practically even get it done? Who even knows? It is far from the first time a president has acted via decree, but more than anything else, it highlights the glitch in the same system that allows Donald Trump to sign papers and cause global chaos.

At the same time, there is a continued effort to push through labor reform 2.0, with the final texts to be approved next week. Ironically, we now have the ANDI – Asociación Nacional de Empresarios de Colombia calling on the government not to sabotage it, after spending 12 months opposing it, it does beggar belief.

At the core of the problem? Poor treatment of workers. Many Colombian employers, not all, engage in practices, hiding behind legislation, that simply wouldn’t be accepted in developed countries. The ANDI feels the reform is less harmful than a referendum.

Accordingly, a number of presidential pre-candidates decamped to the Asobancaria congress and contaminated it with their conflicting views. Expect a plethora of legal speak over the coming weeks.

The same congress referred to the OECD – OCDE cutting 2025 GDP estimates from 2.7%-2.5%, and whilst disappointing, it is still a good number. The issue, in large part, is the deficit situation, and exports are a big part of that. This week’s April data was again poor. There was a drop of 6.5% with a 34.7% decline in commodities. Trumponomics at work in the oil sector. There will be much trepidation ahead on the import number from Departamento Administrativo Nacional de Estadística – DANE Colombia amid concerns of another huge deficit. This is due to continued robust commercial activity amidst the consumer durables sector, coupled with a record low unemployment figure, people are spending. To highlight this, May vehicle sales rose 33% YoY to 19,707.

The impact of all this turmoil? A strengthening Peso (<$4100) and a stock market up 28% (dollar terms) YTD – go figure!

Have a great day.

Roops.

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President Gustavo Petro. Photo credit: Presidencia de la República de Colombia.