Commodities, growth hurdles for Colombia after elections
May 27, 2014
Continued reliance on commodities means new president will need to tackle falling GDP expansion, says Capital Economics
||Source: Adam Wyles
Colombia’s new government will face slower growth in the coming years as natural resources prices fall, analysts at Capital Economics said after the country’s presidential elections on Sunday.
The vote has gone to a second round, pitting incumbent Juan Manuel Santos against Oscar Ivan Zuluaga. Santos won 25.6% of the vote and Zuluaga, 29.3%, in the first round.
Both candidates served as finance minister under Alvaro Uribe’s government, and their financial and economic policies are similar.
“The result of the run-off is unlikely to cause much of a stir in the financial markets, no matter which candidate prevails,” Capital Economics’ David Rees wrote in a research note published on Tuesday.
“But with neither man likely to tackle Colombia’s high dependence on the export of natural resources, growth during the next presidential term will probably be slower than during the last four years as the global commodities boom fizzles out.”
Peace talks with the Farc guerrilla group have been the focus of electoral campaigning, with Zuluaga saying he would suspend the discussions. That would be negative, but would not have a “major” impact on markets, Barclays analysts said in a research note on Tuesday.
“The general market consensus has been that Colombia has already received most of the economic benefits from the improvement in security conditions, such as the possibility for oil and mining companies to explore certain areas of the country that used to be controlled by the guerrillas. Meanwhile, other economic benefits of peace, such as a possible reduction of military spending, seem less likely in the short term since security will still be an important public policy issue.”The second round vote is scheduled for June 15. LF