On Sunday, Colombia will hold a run-off election to determine who will lead the country as the first elected president since its historic peace deal was signed. Despite multiple global headlines insinuating that the fate of the agreement hinges on the outcome, investors should feel optimistic as we head into the final vote - the country has been tested by the contentious peace process and an incredibly polarizing election - through all of which it has maintained a steady course.
The country’s first-round vote, held at the end of May, saw right-leaning Ivan Duque garner a strong majority, but not enough to surpass the 50% required to win outright. He will now face-off against progressive Gustavo Petro, the first major leftist candidate the traditionally conservative country has put forth in decades. Centrist candidate Sergio Fajardo finished in a close third in the first round, with nearly 24% of the vote - He and fellow centrist, Humberto de la Calle, had refused to establish a coalition that likely would have seen Fajardo take second place instead of Petro. This, in turn, would have been more likely to unite the left-wing vote and present a real challenge to Duque in the run-off. Fajardo has since refused to endorse either candidate, instead announcing that he will cast a blank vote, leaving his supporters up for grabs.
Increasingly Polarized, In Search of the Middle
A former rebel himself, Petro will have a difficult time winning over Fajardo’s centrist votes to overcome Duque. Ahead of the run-off, he has attempted to position himself as the candidate in favor of the peace accord, hoping to galvanize young Fajardo voters who otherwise would have no reason to cast a vote for him. It’s likely this is too little, too late, however - his support of the peace process was already well-established ahead of the first-round, and as Duque has increasingly issued reassurances that the treaty won’t be torn up, Petro’s single-issue focus in the final days of campaigning may hurt him. Exiting President Santos’ low approval rating is largely a result of Colombians feeling that he focused too much on the peace deal and not enough on the country’s issues of unemployment, taxes, and economic growth. That in and of itself reveals that the country is ready to move on from the violence that has plagued it for half a century. Voters are more concerned about substantial policy issues, namely the economy and unemployment, and it is here that Petro and Duque differ drastically. Petro still carries with him a largely negative image, and it is likely that many voters will end up casting a vote not in direct support of Duque, but against Petro.
Duque, meanwhile, is now facing the strongest liberal swell the country has seen since the start of the civil war, and a nearly equal level of support for Farjardo shows that while the electorate may be split along the terms of the peace deal, a huge swathe of the population feel very strongly about keeping it in place - Duque has responded by softening his tone to win over these centrist voters, emphasizing that his outspokenness against the deal relates to its terms, and not its core. Nobody wants 8,000 people back in the mountains - whoever is elected to lead the country knows there is no going back, and will focus on maintaining stability and forging ahead by focusing on socioeconomic policies. Duque may continue to espouse a tougher rhetoric on former guerrillas accused of war crimes, but when push comes to shove, he will let the process be.
Sharp Economic Differences
While neither candidate has put forth a fully-fledged economic policy, Duque represents a very traditional outlook - having campaigned heavily on issues of economic growth and unemployment, he would undoubtedly seek to continue along the path the country has been trending towards in recent years. In contrast to Petro, who has proposed a ban on open-pit mining and shifting state-run oil company Ecopetrol towards a renewable energy platform, Duque would likely look to shore up the country’s primary industries and decrease taxes for foreign investors. Exactly how such tax cuts would be implemented without raising the ire of the country’s revenue agencies remains to be seen, but Duque would bring with him the full support of Congress, where the right-wing holds a strong majority. Petro, meanwhile, with his talk of land reform and a proposal to focus more on renewables and agriculture than on natural resources, has worried investors. As the country has continued to stabilize since signing the 2016 peace accord, Petro represents the unknown, and that harkening of instability will do him no favors.
While Colombia’s polls are historically inaccurate, they decisively predicted Duque’s first-round run, and recent polls continue to cast him as the clear favorite to win the presidency in the June 17th run-off. It is also worth noting that even if Petro pulled out a surprise upset, his proposed policies have no real chance of being passed, due to the strong majority opposition in Congress. Regardless of who emerges victorious on Sunday, however, investors have good reason to be confident - the country’s biggest hurdle was signing the 2016 deal and navigating the choppy waters of implementing it since. With its strongest test gradually receding from the forefront of politics, this bodes well for the country’s future economic outlook.
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- Ian Herbison, CEO