To summarize a number of key points of President Petro’s plan that could have the largest impact on business, his agenda includes the following:
- Eliminate the exploration of non-renewable natural resources and shut down coal and mining operations over the next 15 years
- Greater regulation and taxes on large companies
- Higher taxes on the wealthy
- Free college tuition
- Raise the minimum wage
- Pension reform that unifies the private and public systems in which a payment is granted to all persons of retirement age (this implies the nationalization of private pension funds or individual savings regimes)
- National Government would employ all people who cannot find work in the private sector (roughly 2.9 million people at the moment)
- Review and renegotiate the Free Trade Agreements, including with the US, Colombia’s largest trading partner
- Implementation of tariffs on agri-food and agroindustrial goods and supplies
- Strengthen cooperation relations with the UN, the European Union, the US, and the countries of the Pacific basin, especially China, Japan, South Korea, and Southeast Asia
The measures proposed by the president-elect are designed to cater to the poorer population of Colombia but pose a potential threat to business and the economy as a whole if carried out. While the plan in its entirety would arguably benefit many Colombians, critics claim Petro’s plan isn’t economically feasible.
Oil and gas account for more than 50% of the country’s export earnings. While Petro aims to reduce dependency and combat climate change, dismantling this sector could cause ripple effects throughout the economy and limit the ability of the government to pay for the social programs proposed by the president-elect. The push towards green energy is increasingly seen as positive by voters and governments around the world, but unless executed strategically, it could damage an economy highly dependent on fossil fuels like Colombia.
The corporate tax rate in Colombia is already quite high at 35%. Further increasing taxes on businesses may discourage foreign direct investment that has poured into the country over the past decade. This in conjunction with protectionist policies like levying tariffs on imports and renegotiating free trade agreements could have an isolating effect on Colombia.
In terms of the pension plan that leftist economist Petro has in mind, it fails to address the issue of underfinancing and the fact that a high percentage of the working population is part of the informal economy that does not have access to any pension plan. To add millions of additional recipients to the pension program who have not contributed, funds would deplete rapidly and cause an even greater issue for the system, adding stress to the already tight budget.