Academics classify Colombia as one of the most stable democracies in Latin America. At the same time, the country is well known for having the highest inequality in Latin America and the longest internal conflict in the world, as well as its leadership in producing and trafficking illegal drugs. The oligarchy – a small number of large landowners who wield significant political power in the Colombian Congress – retain much of their influence.
Colombians had an opportunity to bring the conflict to an end in October 2016. However, the electorate narrowly rejected a peace deal between the government and Marxist Farc guerrillas in a referendum. Since then, Colombia has maintained a fragile peace. Polarisation between supporters and opponents of the deal (mainly the oligarchs) has been translated into other social, political and economic issues, including the presidential race.
Foreign investors and business people should not panic. Whatever the result of the election on 27 May, it will not lead to broad economic changes.
Leading the polls is the right-wing Democratic Centre party candidate Iván Duque. His economic proposals centre on lowering taxes and promoting big business. In rural areas, Duque proposes boosting large-scale agriculture through subsidies, to increase productivity. To fund the tax cuts, Duque vows to lower public spending and reduce income and sales tax evasion. His policies will not affect the economic structure that has been in place for decades.
On the other side of the spectrum and second in the polls is the left-wing candidate, Gustavo Petro, a former Bogotá mayor. His proposals include raising taxes on corporations and wealthy groups and a larger role for the state in the economy, or nationalisation. He wants to tackle the extreme land inequality by introducing a progressive tax on unproductive large farms, a policy that has been part of the law since 1936 but which has been unenforceable. Increased public spending on infrastructure and education that promotes greater participation in the formal economy by the lower and middle classes is an essential aspect of his economic programme.
He leaves out where the money is going to come from to finance these policies. In principle these policies should alarm investors, but it is unlikely Petro will win the presidency.
First, Venezuela’s terrible conditions under President Nicolás Maduro and the fear that Colombia will become another Venezuela if Petro wins make his presidency a possibility even the moderate centre-left candidates want to avoid.
Second, if the latest polls are correct, a run-off is almost guaranteed. In this scenario, even the ideologically closest candidates are unlikely to side with Petro, given his far-left policies.
Third, in the improbable case that Petro wins, his likelihood of governing with the less than 10% representation he has in the newly elected Congress is low, or he will be forced to compromise on some of his extreme proposals.
The third candidate is Sergio Fajardo, a centrist politician and former Medellin mayor. His economic proposals are not as radical as those of Petro but advocate fiscal responsibility, a reduction in inequality (by encouraging land ownership for small farmers), an increase in public spending and developing the manufacturing industry. Fajardo proposes co-operation between the public and private sector instead of a larger role for the state.
At first glance, it looks risky if a left-wing candidate were to get into power. However, there are important reasons to believe that Colombia’s current economic model will remain unchanged. It will be almost impossible for any substantial reform to pass through the Congress elected in March. The candidates that do not propose any significant economic reform will also be more focused on securing their political agendas: continuing or undoing the peace agreement, or tackling the top problem for Colombians – political corruption.
Maria del Pilar Lopez-Uribe is a PhD Candidate in Development Economics at the London School of Economics.