Written by Holly Teeters
Dubbed an “ex-rebel” by the media, Gustavo Petro’s recent presidential victory in Colombia has many on edge. Petro won the election with 50.4 percent of the vote, beating his construction magnate opponent by a very narrow margin (“Colombia Elects,” 2022). His win has shocked the world as Petro’s promised economic policies are particularly progressive: increasing taxes on the wealthy and weaning the country off oil.
Petro’s experience as an ex-guerrilla has clearly informed his economic and environmental policies. His anti-corruption stance, aggressive tax reforms, and promise to invest in sustainable infrastructure garnered enough support from the public to beat his more traditionally conservative opponents. While the election results were a shock to many given Colombia’s electoral history, the democratic process ultimately reflected the frustrations of the masses who were finally compelled to vote left as a result of the economic consequences of the 2019 pandemic (Vergara, 2022). Repeated protests between 2019 and 2021 demonstrated a passionate frustration with income inequality, insufficient public services, organized crime, and deforestation of the Amazon (Stuenkel, 2022). Contextually, Petro’s win was perhaps overdue.
Colombia’s inequality index (GINI) is 51.3, the highest of the OECD countries. Income inequality has been exacerbated by the pandemic, leaving about 40% of the population living in poverty (“Wealth Inequality,” 2022). Could Petro’s campaign promises have a tangible positive impact on the lives of his constituents?
Increasing taxes on the wealthy could certainly have a positive impact on the impoverished 40% of the country, and Petro proposes a tax reform plan of $10 billion. Only 5% of Colombians pay personal income taxes; this is both a reflection of the state of poverty in the country as well as the ability to find loopholes for tax evasion (Stuenkel, 2022). For comparison, the US has a GINI index of 41.4 and about 60% of Americans pay income taxes every year.
Given the abysmal proportion of taxpayers in the country, closing tax loopholes and eliminating corporate tax breaks would have a large marginal impact on the total tax revenue invested in social programs. By reforming laws that allow for tax evasion and increasing the income tax itself, Petro would be able to finance more health, social security, and education programs. Petro also appointed Jose Antonio Ocampo as his minister of finance, an economist well-known for supporting progressive taxation and a sign that he will follow through with his taxation reforms (Stuenkel, 2022).
The expected pushback from elites due to Petro’s tax policies is nothing compared to the international concern over his oil policies. Petro proposes cutting back on oil new exploration and shutting down fracking projects entirely (“Ex-rebel,” 2022). From a sustainability perspective, this is a crucial step in preserving the environment. From an economics perspective, Petro may be amputating the economy’s strongest leg.
Crude oil makes up 60% of Colombia’s export economy, of which the United States is the largest buyer (“US Energy,” 2022). Reducing this export would significantly lower the amount of money entering the country, have wide reaching effects in other sectors of the economy, and may affect the country’s political relationship with the US. The President Elect has talked of strengthening its trade relationships with other Latin American countries, rather than focusing on the United States – decreasing the country’s oil exports ultimately reflects that sentiment (Stuenkel, 2022). However, there are economic benefits to diversifying one’s production. The question remains: what good or service could supplement the subsequent GDP drop?
Similarly, Petro aims to make agribusiness more sustainable and reduce coca production. Coca plantations are a source of deforestation in Colombia as acres of forest are cleared to make way for illegal cocaine production (Noriega, 2022). Moving away from coca leaf farming could reduce crime in rural areas and help slow the rate of Amazon deforestation.
Farmers are wary of the change. Many argue that coca is the only practical crop in their areas and as such is a primary source of rural income (“Ex-rebel,” 2022). Setting enforcement challenges aside, Petro would have to build infrastructure in rural areas to allow a transition away from coca dependence, and ensure a market expansion for other crops that are not already satisfied by others in the agribusiness. This may prove to be an onerous task.
Despite the challenges Petro will no doubt face while implementing his campaign’s pledges, he has certainly put the needs of the people on center stage. However, many argue his campaign is too broad and that he’ll fail to get anything done without narrowing his focus (Stuenkel, 2022). Regardless of how feasible his goals are, in a country with great income inequality and warring power factions between government and non-government groups, the ex-guerilla’s election may be a sign of peace. Indeed, he has already secured a ceasefire from one of the country’s largest guerilla groups (Noriega, 2022).
Nonetheless, Petro’s election is still fresh, and only time will tell if the “ex-rebel” unfolds to be a populist or a true changemaker.
References
Colombia elects ex-rebel fighter as first left-wing president (2022) Al Jazeera. Available at: https://www.aljazeera.com/news/2022/6/19/colombia-left-wing-ex-rebel-gustavo-petro-wins-presidency (Accessed: December 11, 2022).
Ex-rebel sworn in as Colombia’s president in Historic Shift (2022) NPR. Available at: https://www.npr.org/2022/08/07/1116215977/ex-rebel-sworn-in-as-colombias-president-in-historic-shift (Accessed: December 11, 2022).
Noriega, C. (2022) Colombia’s new president Petro proposes ambitious tax reforms, Al Jazeera. Available at: https://www.aljazeera.com/news/2022/8/9/colombias-new-president-petro-proposes-ambitious-tax-reforms (Accessed: December 11, 2022).
Stuenkel, O. (2022) The greatest risk facing Colombia and its new leftist president, Carnegie Endowment for International Peace. Available at: https://carnegieendowment.org/2022/08/11/greatest-risk-facing-colombia-and-its-new-leftist-president-pub-87663 (Accessed: December 11, 2022).
U.S. Energy Information Administration – EIA – independent statistics and analysis (no date) International – U.S. Energy Information Administration (EIA). Available at: https://www.eia.gov/international/analysis/country/COL (Accessed: December 11, 2022).
Wealth inequality by country 2022 (2022) World Population Review. Available at: https://worldpopulationreview.com/country-rankings/wealth-inequality-by-country (Accessed: December 11, 2022).