The stones in de la Espriella’s shoes
President-elect Abelardo de la Espriella seems to have initially believed he could single-mindedly push his agenda forward, and that Congress would fall into line. By now he surely realizes that won’t happen. Former president Álvaro Uribe’s Centro Democrático (CD) party was not happy that, despite openly supporting de la Espriella in the run-off election, it wasn’t asked to participate in choosing the candidate for the crucial Senate presidency. Uribe decided to signal his annoyance by, in defiance of de la Espriella’s wishes, backing CD Senator Honorio Henríquez, who won. The election of Henríquez is not a total disaster for de la Espriella, as Uribe and the CD still claim to support his administration. But the next president of the Republic failing to have his candidate elected Senate president is a first in recent times.
After de la Espriella was elected on June 21st, one could say that the Petro administration was, for all practical purposes, finished. But for the first time ever (to the best of our knowledge) a lame-duck president has submitted a 1% of GDP tax reform proposal to Congress. The proposal insists on the by now well-known components of Petro’s 2024 and 2025 failed tax reform initiatives, such as higher income tax rates and net wealth taxes for rich individuals; an income tax surcharge for the financial sector; higher taxes on non-renewables; and a VAT on gambling. Some analysts have dismissed Petro’s last-minute tax, fracking and healthcare bills as out-of-place delusions of a sore loser, which the new administration will immediately have withdrawn from Congress. But killing a bill submitted by a ruling administration would be much more difficult. A new government cannot withdraw a bill once it has been submitted; Congress must vote to do that. And if Congress votes against the government’s wishes, the bill would continue to move through the approval process.
Petro knows all of this, of course, and that de la Espriella will surely succeed in convincing Congress to kill these initiatives. But he realizes that there will have to be congressional debates over who pays taxes, whether fracking is desirable and whether a new healthcare system that takes Colombia back to the 1980’s makes sense – all gestures that could make life harder for de la Espriella. Awkwardly, the current administration also had to submit a 2027 proposed budget to Congress before July 30. Unsurprisingly, it includes spending far in excess of fiscal possibilities: the financing gap is equivalent to COP 30.2 trillion (1.4% of GDP). Now it will fall to de la Espriella to ask Congress for cuts; to fight with those who want to keep the eliminated items; and to watch Petro criticize every cut made – as the outdoing president milks de la Espriella's “pain” for political gain. Rest assured, Petro is already thinking about weakening de la Espriella, with his sights on the struggle for leadership in 2030.
The next El Niño is expected to arrive in Colombia as early as August. Though the country’s electricity sector has weathered every El Niño since the devastating 1991-1992 electricity rationing, thanks to major market-oriented reforms, stronger regulation, private investment and a reliable thermal generation system underpinned by abundant natural gas, the system’s resilience is now being tested. Forecasts suggest that the ocean phenomenon could be the strongest in decades, and Colombia confronts it with weaker fundamentals. Domestic natural gas output has stagnated; fuel prices have risen; and renewal capacity is constrained. The transition to a new government is a further complicating factor. So a severe El Niño could intensify inflationary pressures, strain the electricity system and test Colombia’s economic resilience.
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