Fiscal moves require some clarity
The three themes dominating politics are President Iván Duque’s recovered popularity, Colombia’s role in the Venezuelan debacle and the future of the FARC-related Special Jurisdiction for Peace (JEP). Duque’s approval ratings have benefited from his recent moves pleasing the uribista right, namely, the killing of ex-FARC comandante-turned-ruthless narco-trafficker Guacho; the tightening the stance toward the ELN, after a police academy bombing; and especially, the backing of Venezuela’s Juan Guaidó, who has proclaimed himself president there. Duque’s approval ratings have recovered more than half of their September-November 2018 losses, to reach nearly 43% this February. And the polls show that Colombians also favor Duque’s anti-Maduro, pro-Guaidó stance.
For now, Duque has placed himself on the right side of history; enjoys some leadership in the Lima Group; and recently visited U.S. President Donald Trump in Washington, which has enhanced Colombia’s international role. Yet Duque will continue grappling with challenges. Things could deteriorate if the diplomatic impasse with Venezuela leads to a full-blown crisis, with military complications. There’s also an outside chance that the JEP impasse over the FARC peace settlement could lead to a domestic peace crisis.
There’s been a good deal of action on the fiscal front in February, with the Financial Plan, laying out the revised 2019 fiscal strategy, released early in the month. The pluri-annual National Development Plan bill was submitted to Congress and has some direct implications for the next few years of fiscal policy. Ecopetrol announced its dividend payout of COP 9.2 trillion, with material impact on the government. Amid all of this activity, the fiscal policy path remains uncertain.
Minister Carrasquilla has the trajectory of a fiscal hawk, and public finances are in safe hands under his care. Be that as it may, a clearer narrative, showing how all the pieces of the puzzle fit together, is still needed. Fiscal policy is never easy in Colombia, but it is precisely because of this recurring truth that additional information is required.
Lastly, it deems urgent to discuss the unsustainability of the pension system which also entails higher fiscal pressures. The challenges of the Colombian pension system are many and, more importantly, deep. Unfortunately, from the onset, it must be said that there is no hope that in the foreseeable future they will be solved, as, first, there is no political appetite to do so and, second, the proposals that are floating around do not cover or solve the real issues facing the system. Additionally, the lack of agreement within the government is very discouraging and, importantly, this government has already shown that it easily backs out immediately from reforms that may cost it even a little bit of political capital.
Now read on...
Register to sample a report