Another minister with an impossible job
The first impression one gets from the latest economic activity results is that Colombia did not take advantage of an enormous opportunity offered by international markets and economic conditions. Oil and coal prices were high over the last two years, as was demand, and 2024 economic growth in the country’s main partners (the United States, Europe, Chile and China) was strong. But growth in Colombia barely reached 2% during the last two quarters of 2024 (and was just 1.7% for the entire year). Most sectors still show sluggish numbers, employment does not react, and exports are still very low and, in many cases, decreasing. Though 2025 started with slightly higher numbers, they were still well below Colombia’s potential growth rate, of perhaps 2.8%-3%. So we have low growth, at high risk of slowing even more due to the dire fiscal situation, the productive sector swamped by bureaucracy, over-regulation and all kinds of obstacles, while violence, guerrillas and narcos regain in force and territorially. Plus, there’s not enough fiscal space for badly-needed financing for the Armed Forces, and there’s an expanding healthcare crisis. So, sadly, everything seems kind of bleak right now, and there are no signs that the government will change its policy stance in its remaining 17 months. On the contrary, the early stance of the new finance minister seems to point in the opposite direction. So, it is appropriate to invoke a very Colombian saying: “I am dying of thirst, and the water is so, so, so far away.”
Ex-Finance Minister Diego Guevara’s successor Germán Ávila will face the daunting task of safeguarding whatever’s left of the credibility of this administration’s fiscal policy. The uphill task is twofold. First, Ávila must realize, and then convince, President Gustavo Petro that the fiscal situation in 2025 is much worse than in 2024, and must also find where to cut to make ends meet at yearend. Assuming the realizing and convincing parts take place -- not very likely -- the cutting part might turn out to be just as hard.
Diego Guevara had the shortest tenure in history for a finance minister. The online newspaper La Silla Vacía got some inside information on the particulars of his demise. It reported that Petro was open to discussing Guevara’s aggressive budget cut plan, aimed at slashing 37 trillion pesos throughout the year. However, facing the failure of the labor reform, the president changed his mind, “opposed the cuts and interpreted Guevara's plan, the most unorthodox minister to hold the position of finance minister this century, as a ‘political betrayal’ -- and fired him.” Interestingly, Guevara and his technical team considered implementation of their austerity plan time-sensitive. If they reached the end of June without cutting specific expenditure items, they would lose their only opportunity to comply with the fiscal rule. Indeed, that date was dubbed “judgment day:” a date when there would no longer be room for cutting, because the government would commit everything to inflexible expenses, such as civil servant salaries, transfers and services.
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