Colombian Bonds and Peso Drop as Ruling Coalition Disintegrates
Colombian President Gustavo Petro asked his ministers to resign on Tuesday as he prepares a cabinet shakeup to try to get his reform agenda back on track after a series of legislative setbacks.
Finance Minister Jose Antonio Ocampo said in written reply to questions that he will comply with Petro’s request, conforming with protocol, and will await the president’s decision on whether to accept his resignation. Analysts at Citigroup said Ocampo is unlikely to leave the cabinet.
Colombia’s first leftist president is attempting to overhaul the nation’s conservative economic model by boosting worker rights and increasing the state’s role in health care and pension provision. But he’s his majority coalition has disintegrated and he and has faced stiff opposition, including from allies in congress and even from members of his own cabinet.
Petro’s move came after lawmakers removed an article in his development plan that would allow the government to buy land for farmers as part of a peace deal with illegal armed groups. The president said his governing coalition had ended.
“We have to install a government of emergency, given that congress wasn’t capable of approving some simple articles, very peaceful, that would have enabled more democratic use of land,” Petro said, in a speech in the southwest of the country.
Such a government “doesn’t imply an emergency decree, but means that government workers labor hard, day and night, every day, to achieve our objectives,” he said.
While Ocampo is likely to stay, the break in the government’s coalition will hurt its ability to pass its far-reaching reforms, according to Citigroup.
The peso dived during Petro’s first months in office, though it has recently pared losses as investors bet that his more radical plans will have to be heavily watered down. The currency has gained 5.8% this month as Petro’s troubles in congress increased, making it the best performer among major emerging markets.
Also on Tuesday night, a congressional commission approved the text of a health bill that will be voted on following debates in both chambers. However, several key groups in congress, including Liberals, Conservatives, and the U Party ordered their members not to back the government-proposed initiative, in another blow for Petro.
“The move may be read as a strategy by the president to pressure parties into voting in favor of the reform agenda, but given the insistence of party leadership to vote against, it could also also ultimately imply a shift to the left in cabinet composition,” Citi economists Esteban Tamayo and Laura Bertran wrote in a report.