How will Colombia’s economy be affected by the recent government reshuffle?

Petro ends his governing alliance:

Colombian President Gustavo Petro dissolved his congressional alliance on 25 April after three member parties refused to back a health reform bill. The day after, Petro reshuffled his cabinet, appointing Ricardo Bonilla—a long-standing ally of the president—as Finance Minister, replacing José Antonio Ocampo. Ocampo was well-respected by investors, with his dismissal leading Colombian assets to plunge in late April. They have since recovered, but risks remain elevated ahead.

Fiscal rule:

100% of the economists we polled in early May expect the government to continue to respect the fiscal rule in 2023 and 2024. According to the rule, the government cannot run a deficit on its primary balance—the budget balance excluding interest payments—in excess of 1.4% of GDP in 2023 and 0.2% in 2024. Although Petro may have more influence over Bonilla than over Ocampo, breaking the fiscal rule would curtail Colombia’s access to international capital markets—a price which would be too heavy to pay.

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Central Bank independence:

Petro has been critical of the speed and size of the Central Bank’s recent rate hikes. Nonetheless, 62.5% of the economists we polled see the Central Bank retaining its independence completely after the reshuffle. The rest see the Central Bank retaining its independence to at least some extent. This suggests that although the new-look government may increase the pressure on the Central Bank to lower interest rates, it is unlikely to directly interfere in its decision-making process.

The financial sector:

Moody’s, one of the world’s big credit rating agencies, stated in early May that the political uncertainty created by the reshuffle could undermine investor confidence. In line with this, 50% of the economists we polled expect the political uncertainty created by the reshuffle to knock Colombian financial assets to some extent in 2023 and 2024. 12.5% see a significant negative effect. Meanwhile, 37.5% see no negative effect. Maintaining fiscal prudence and respecting the country’s independent institutions will be key to limiting financial fallout ahead.


62.5% of the economists we polled see gridlock in Congress increasing to some extent as a result of the reshuffle, and 25% see gridlock rising to a large extent. 12.5% see no increase in gridlock. The president’s ambitious reform agenda was already facing obstacles before the breakup of his coalition and his move to the political left; flagship policies such as reforms to the labor market, pensions and health system are now likely to be watered down or blocked given the president’s weaker political clout.

Insights From Our Analyst Network

The EIU commented:

“The premature dissolution of the coalition, coupled with the dismissal of moderate ministers (especially that of Mr Ocampo), will usher in a period of heightened political and economic instability and uncertainty, which will weigh on private investment, cause currency depreciation and produce growing downside risks to our GDP forecasts.”

Analysts at Goldman Sachs said:

“We think that the market focus will be on whether Mr. Bonilla will effectively assert his independence, bolstering the Ministry’s credibility and reassuring investors and market participants about his commitment to continuing with Mr. Ocampo’s fiscal consolidation. We will have a better gauge of the government’s fiscal plans at the presentation of the annual medium-term fiscal framework in June.”

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