No one falls from grace halfway
In Latin American national elections today, the opposition has an 80% chance of winning, according to a recent statistical analysis. After the 2015 commodities crisis, and especially after the COVID pandemic, opposition parties won almost four of every five elections in the region. We are seeing a similar trend in Colombia’s regional elections, such as in Medellín, Cali and the gubernatorial races. President Gustavo Petro’s 2022 regional victories were not maintained in October 2023. Rather, Colombia rushed back to the past, with the political left losing key races in places like Bogotá and Valle del Cauca in comparison to 2019, and in most of the crucial Pacific and Caribbean regions, compared to 2022. The left and center-left took 9.4% of the vote, a plunge from the 50% of 2022 and 12% of 2019. The center rose from 3.1% in 2019 to 12.9% in 2023, and the right dipped from 84.4% to 78.1%.
Petro’s candidates for mayors, especially Gustavo Bolívar in Bogotá, suffered a historic defeat. The Petro administration’s poor management of politics, security and the economy have been blamed, along with problems in key areas like healthcare, housing, electric energy, oil and gas and international and labor relations. The president is also prone to erratic behavior, displayed unfiltered on his X account. In a single day he can react to events in Gaza, the Bogotá subway construction, violence in a distant municipality and the congressional reform agenda. The cacophony enervates the public. And scandals abound in both his administration and his family, tarnishing his onetime corruption-fighter image.
Colombian regional politics are working in ways similar to the stock market, and that’s crucial for institutional stability (or instability), for the prevalence and survival of political actors, and for the design of campaigns. Before what could be dubbed “the political IPO,” namely, Election Day, many parties bet on one person, and many on another. Carrying the simile to its extreme, candidates issue “political shares” to preferred clients, which the parties “buy.” After the IPO (Election Day), more shares can be sold to losing parties, if they want to join the governing coalition.
What could be the consequences of the adverse October 29th results? First, Petro’s governability will suffer, as the political parties will try to realign with the new political reality. Members of Congress will find themselves in a dilemma. If they back Petro’s reform agenda, and his government falls deeper into trouble, they could end up staying too long with a sinking ship. Yet legislators need the national budget to survive in their regions. So they are likely to keep negotiating with the Petro administration, while asking for a higher price in return. Simultaneously, they’ll probably drag their feet, to wait and see where Petro’s governability goes.
We still see a 75% probability that the latest version of the pension reform will be approved. Conversely, healthcare reform’s probability could be 50/50 now, and labor reform 20%.
The Colombian Nobel Prize winner Gabriel García Márquez wrote in Love in the Time of Cholera: “No one falls from grace halfway”’(nadie cae en desgracia a medias). In the times of long COVID, Petro could become living proof of this truism.
The Oil, Gas & Energy Services Chamber, Campetrol, recently published a worrisome communiqué, citing a 25% decrease in active drills in Colombia in September 2023 from September 2022 (39 fewer drills). They and oil companies estimate a loss of about 20,000 jobs in the last 12 months. They largely blame the road blockades and rise in protests that make it harder to deploy capital. In fact, oil production in Colombia in August 2023 was 4.3% higher than in August 2022. But the crucial issue is the large gasoline and diesel subsidies. Ecopetrol acts as the government’s financier of the Combustibles Stabilization Fund, paying for subsidies, and waiting 12-18 months until the government repays. Meanwhile, Ecopetrol’s liquidity is constrained, hindering exploration and development. Negative prospects are now common for the O&G industry. This is way more damaging the ban on exploration licenses. Only one in eight firms in Colombia is considering expanding its operations, and half are considering downscaling their presence in the country. The news from gas is even more worrisome: in 2023, gas production declined 1.7% vis-à-vis 2022, and the prospects for 2026 are somber.
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