Petro’s (unclear) path

A 77yr old firebrand conservative is shaking up Colombia’s presidential elections. 

Over the last few months, headlines and analyses covering Colombia’s presidential elections have talked about leftist Gustavo Petro (“Petro”) as a dead cert for the presidency. His campaign has dominated coverage and commentary. Who’d have thought a firebrand septuagenarian might put a spanner in the works? The rise and rise of conservative businessman Rodolfo Hernández (“Hernández”) took both markets and pundits by surprise. Markets, unsettled by Petro’s big state policies, are watching Hernández closely – a conservative administration reduces the likelihood for economic policy uncertainty.  

A senior adviser to several leading Colombian private and public sector entities explained, “What has been surprising is the speed at which Hernández has surged in the polls. His lack of political experience is concerning given the complexities of Colombian politics. There is no doubting that his campaign’s electoral marketing and the clarity of his campaign messages has been persuasive and extremely effective.” 

[Hernández’s] lack of political experience is concerning given the complexities of Colombian politics. There is no doubting that his campaign’s electoral marketing and the clarity of his campaign messages has been persuasive and extremely effective.” 

A senior adviser to several Colombian private and public entities

In May’s first round elections, Petro was the clear winner counting just over 40% of the total vote count, Hernández secured 28%. Given that Colombia’s entire conservative political establishment is likely to throw their weight behind the Hernández campaign, including those allied to Federico Gutiérrez (who came third with 24% of the votes) – Petro now faces an uphill battle in the run-off scheduled for this Sunday. To win, both must now appeal to the middle ground – wary of Petro’s hostility to orthodox fiscal policy and to Hernández’s social conservatism which appears at odds with much of the country’s younger urban population who have taken to the streets numerous times throughout the administration of Iván Duque.  

In the days since the first round, the peso has strengthened around 3.5% against the USD reflecting the fact that investors are eyeing a lower likelihood of radical changes to economic policy should Hernández reach the Palacio de Nariño. Both candidates are likely to be pushed further toward the middle ground, more pragmatic economic policy may emerge from the Petro campaign whilst Hernández could tone down views on abortion and LGBTQ rights. Hernández nonetheless remains the anti-establishment figure. More broadly, the presidential advances of both candidates represent a significant shift in Colombia’s political landscape. The country’s long-established parties including the Conservative, Liberal, Democratic Centre and National Unity Social are now out of the race.  

An adviser with more than 25 years advising institutions on national security and economic policy in Colombia explains, “Tax reform is a critical issue in Colombia – better fiscal policy depends on implementing serious structural changes to the tax system. Petro however will find it very hard to push through reforms likely dominated by a conservative congress – there will be politically motivated allegations of avoidance and evasion and a Petro administration will struggle to reach consensus.”

“…Petro however will find it very hard to push through reforms likely dominated by a conservative congress – there will be politically motivated allegations of avoidance and evasion and a Petro administration will struggle to reach consensus.”

A senior adviser to several Colombian private and public entities

What could we expect from a Hernández administration? Given his background, he will likely favour free enterprise policies and a private sector-led development model – Petro has railed strongly against such development policies that they have entrenched socioeconomic inequality in the country for years.

Hernández himself has never held high political office – Colombia’s complex political factions – reflected by one of the region’s most partisan congresses – requires deft negotiating skills to unite in order to pass legislation. Whilst his election may improve economic stability it may simultaneously increase political instability. 

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