Economic model and American relations at stake in the Colombian election

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(Bloomberg) — Colombians are voting in the presidential election to choose between an ex-guerrilla who wants to transform their business-friendly economic model and a construction magnate who is under investigation for corruption.

Leftist Gustavo Petro, 62, a former mayor of Bogota, wants to raise taxes on the wealthy, stop oil exploration and protect local industry and agriculture with tariffs.

Rodolfo Hernandez, 77, was until recently little known outside the provincial town of which he was mayor, but drew millions of supporters with his attacks on crooked and wasteful politicians, often using social media. Its economic policy program lacks detail.

The fact that two anti-establishment candidates made it to the second round despite having one of the fastest economic growth rates in the Americas this year is a sign that Colombians are demanding to move away from the traditional style of politician who led the country for decades. The result is also likely to upend the country’s close relationship with the United States.

“Things won’t be the same,” said Mauricio Cardenas, a former Colombian finance minister who is now a regional adviser for Goldman Sachs Group Inc. “Here we have two outsiders, people who are not part of the system.” Whoever wins, he added, this election will mark “a turning point”.

Investors clearly prefer Hernandez, and the peso rallied after he made the second round, although he later gave up those gains amid uncertainty over his program for the government. Many fund managers are wary of Petro, among other things because its plan to phase out oil and coal would deprive Colombia of about half of its export revenue.

The economy is expected to grow 5.8% this year, the fastest pace among major Latin American economies, according to the International Monetary Fund.

Markets will not fully open until Tuesday due to a public holiday in Colombia and the United States on Monday.

Polling stations are open from 8 a.m. to 4 p.m. local time, with results expected early Sunday evening. Petro’s support is concentrated among young Colombians, and the outcome may depend on how many of them vote.

Relations with the United States

Colombia has been one of Washington’s closest allies for decades, but this election could change that.

Whoever wins, the vote is likely to destroy the bipartisan consensus under which Democrats and Republicans have backed military cooperation and joint efforts to combat drug trafficking, said Sergio Guzman, director of Colombia Risk Analysis. .

U.S. Republicans will be reluctant to endorse Colombia funding if Petro is in power, while Hernandez’s policies and some offensive comments he’s made about women could make Democrats less likely to engage with him, said he declared.

“Either way, this relationship is going to crumble,” Guzman said.

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