Don’t panic: Colombia’s elections won’t result in large economic changes

Fear not, investors! The upcoming Colombian congressional and presidential elections are unlikely to significantly affect your portfolios. While some are concerned about leading presidential candidate Gustavo Petro’s proposed leftist policies, more careful analysis shows a Petro victory to be unlikely. What’s the cause for concern? Petro is a controversial candidate with a penchant for issuing bold statements. In some of these statements he has expressed an interest in increasing the government’s role in the economy, which some believe to mean nationalization of certain industries. He has also extolled the virtues of former Venezuelan President Hugo Chavez, which is alarming to many given that Venezuela currently more or less constitutes a failed state.

However, even if he or another radical candidate does win, his/her impact on the economy is not projected to be significant. Why?

  1. The upcoming congressional elections are likely to produce a split congress, which will make the ratification of major change-inducing policy extremely unlikely
  2. Given that Petro is unlikely to win with a majority vote, the presidential election will result in a runoff between him and the runner-up. In the event of a runoff, the other candidates will likely not steer their bases towards a far-left candidate such as Petro, instead favoring a more centrist option
  3. The Central Bank will remain in charge of monetary policy, maintaining the bank’s current economic orthodoxy
  4. Bilateral and multilateral international trade commitments, from which Colombia will be unable to withdraw in a mere 4 years, will exert stabilizing pressure on the economy

The medium and long-term economic stability of Colombia is no cause for concern.

Read source post by: Sergio Guzmán and Carlos Giménez

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