Polarization in Colombia’s Primary Elections Increases Risks To Coffee
Coffee Network (Bogota) –Colombia’s presidential elections in May face a highly polarized scenario as leftist presidential candidate Gustavo Petro secured the nomination of the left-wing, while candidate Federico Gutierrez won the far-right during yesterday’s primaries and congressional elections, posing a mixed threat to the coffee industry.
Petro received 81.5pc of the votes of the Pacto Historico coalition with 4.48 million votes, while Gutierrez got 52.2pc of the Equipo por Colombia coalition with 3.98 million votes.
The two candidates will compete along with at least five independent candidates presidential elections on 29 May. Colombia will hold a second round of elections on 19 June if no candidate secures the 50pc-plus-one vote during the first round.
“The disappointing performance of the center-left coalition has materially increased the probability of a runoff between Petro and Gutierrez, making the scenario more uncertain as it will critically depend on the centrist voters,” Brokerage Credicorp Capital said. The center-left coalition Centro Esperanza obtained 2.15 million votes.
Petro would like impose higher tariffs to protect the agricultural and industrial sectors; set a very high property tax on idle lands in the rural areas; increase the role of the state in the healthcare sector, direct financing of the central bank to the government, and halt oil exploration as part of a plan for energy transition.
"I want to make a change in Colombia where the economy is based on rural agricultural work and industry. … The 21st century means knowing about agriculture and industry," he said. "The democratization of land in Colombia will allow us definitive peace." Petro added that the democratization of land, education and credits will generate "dignity" and higher incomes in Colombia.
In yesterday’s victory speech, Petro said: “We do not need to expropriate, we need to democratize,” he said.
Gutierrez for its part said: “We propose to change to move forward. But a change can never mean a leap into the void, as has happened to other countries in the region. That cannot happen to Colombia, nor will it happen,” Gutierrez said in the victory speech. “We need to form alliances to defend democracy,” he added.
For coffee growers, the potential arrival is a threat to their farms and businesses.
“This is very worrisome. Some coffee growers are saying they will sell their land if that man wins. If someone suggests buying my farm, I will sell it,” Juan Alvaro Arboleda, a large coffee grower and exporter said noting that in Colombia large coffee farms do not surpass 500 hectares.
Colombia,the world’s third-largest coffee producer, produced 12.6 million bags of 60-kg last year, and it is expected to produce 13-13.5 million bags this year.
But an ‘“everyone against Petro”’ strategy becomes plausible in the second
round,” says brokerage Credicorp said in a research note. Colombians will vote for president in May 29, and if no one secures a 50% plus one vote, the two leading candidates will compete in June.
President Ivan Duque and other opponents say Petro would move Colombia in the direction of neighboring Venezuela, which faces economic collapse and political repression.
Petro is looking to raise taxes on the wealthy, implement the 2017 peace deal with Colombia's main rebel group, and increase public sector participation in the economy and replace oil profits with tourism.
Government budgets also depend highly upon both oil extraction and foreign investment — changing that overnight is highly unlikely, analysts have repeatedly said.
Congressional Elections
But if Petro wins the presidency any proposal to halt oil exploration and expropriate idle land would be a challenge as lawmakers of the far left came below expectations in yesterday’s congressional elections, strengthening the view that congress will be a key counterweight for the next administration.
Both the left- and right-wing coalitions secured 16 seats in the upper house. In the lower house, both coalitions took 25 seats each. In total, the upper house picked 108 senators and 187 lower house seats.
"We think that institutions in Colombia are strong, and are set to be the main counterbalance to avoid the implementation of radical proposals," Credicorp said in a research note.
Although it is too early to assume potential alliances, it seems very tough for any candidate to achieve more than 50% in Congress, even considering that political parties not necessarily vote projects as a block. Then, regardless of who is elected as president, the next administration will have to form alliances to pass reforms and implement campaign proposals, while it will likely have to pick his battles, Credicorp concluded.
