Chart of the Week: Colombian Presidential Elections Threaten Changes to Peace Accord

The chart of the week is from Alejandro Valerio, Senior Analyst for Latin America:

After signing a controversial peace accord to end a 53-year conflict with the FARC in 2016, Colombia is heading into the most consequential elections in its modern history. Congressional elections on March 11 will determine whether Congress will be fragmented again, making it harder for the next administration to pass the economic reforms needed to improve Colombia’s business environment. The presidential election on May 27—likely to go to a runoff on June 17—will decide whether the next administration will focus on tackling the economic challenges and continuing the implementation of the peace accord, or if it will revise the accord, with unknown consequences. The results will greatly influence Colombia’s economic performance and business opportunities in the years to come.

 

This chart, which comes from a full piece we published last week called “Colombia Election Scenarios,” summarizes the positions of the major candidates. The best outcome for Colombia, a country desperately in need of stability and pro-business reforms to attract fdi, would be for one of the candidates in the upper-right quadrant to carry the election. But there are plenty of other candidates in the field. I think there is a 25% chance that a peace-revisionist wins the Presidency, with uncertain and potentially dangerous consequences. Problematic for other reasons is Gustavo Petro, who is in favor of more active state intervention in the economy. He is leading the pack according to some polls.

 

The polls have been wrong in the last three elections in Colombia. It will be very difficult to know the outcome of the election before the runoffs take place in June. MNCs active in Colombia should create scenarios and conduct contingency planning in case a peace-revisionist wins, as there is potential for a relapse in violence that could jeopardize everything from consumption activity to distribution channels. In the case the pro-statist Gustavo Petro wins, a period of heightened FX and demand volatility is likely. Even if a pro-reform, pro-current peace accord candidate wins, the near-term uncertainty may depress domestic activity, while potentially paving the way for more opportunity down the road.”


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