By Carlos Vargas
BOGOTA (Reuters) – Colombian President Ivan Duque looks likely to win approval for a long-delayed tax bill in his final year in office, but other unpopular reforms have little chance to pass a divided congress, analysts and lawmakers say.
Center-right leader Duque has never had a congressional majority and anti-government protests in May and June diminished his already-weak popularity, making it improbable congress will back reforms ahead of elections in May, when the left could win seats on the back of growing social discontent.
Lack of progress on economic, pension and labor reforms could spell longer-term problems for Colombia, whose credit rating has already been reduced to junk by two ratings agencies, analysts say.
A modified tax reform, worth nearly $4 billion a year in additional revenues, is expected finally to pass after a prior version was withdrawn amid protests and lawmaker opposition, costing the previous finance minister his job.
It will be a big challenge to muster backing for other major changes, according to experts.
“I am not sure (Duque) will have sufficient legislative support, above all because an election year is coming,” said Mauricio Jaramillo, politics professor at Rosario University.
Standard and Poor’s and Fitch cut their investment ratings for Colombia to junk in May and July respectively, citing the country’s fiscal deficit, large public debt and mid-term uncertainty. The downgrade prevents many funds from investing in Colombian debt.
Moody’s said it will wait to see what tax reform measures are passed before deciding whether to trim its rating. Colombia’s next government will need to pass further fiscal reforms to address structural issues holding back Latin America’s fourth-largest economy, it said.
Because pension, labor and tax reform efforts have sparked street demonstrations over the past three years, the government is likely to proceed with caution, said analyst Sergio Guzman of Colombia Risk Analysis.
“The government knows its legislative proposals could become a detonator for marches and that isn’t favorable for leaving a legacy, nor for promoting policy continuity,” Guzman said.
Whether left or center-left politicians will be able to parlay discontent with Duque into victories next year will depend on which candidates emerge, what happens with the economy, and whether the weak peso attracts foreign investment.
“There’s still a long way to go before we say that this government gave the left a platform,” Guzman said.
DIVERSE PRIORITIES
Lawmakers have diverse priorities for the current legislative session, which began in late July, ranging from regulating community approval processes for infrastructure and energy projects to efforts to finish implementation of a 2016 peace deal with leftist rebels.
Duque’s Democratic Center party is focused on tax reform, which it argues will help reactivate the economy and fund social programs, including so-called solidarity payments to the poorest households.
“The pandemic demanded a lot in social terms. We can’t fail to meet the challenge,” Senator Fernando Araujo of Democratic Center told Reuters. “We need to expand the solidarity payments … with real work incentives and salary subsidies.”
The tax reform law would increase taxes on businesses by 4 percentage points to 35% from 2022 and make cuts in public spending, among other measures.
Duque has said he also wants to enshrine free university tuition for poor and working-class students and pass a police reform bill that he says will protect human rights through better officer training.
Meanwhile, lawmakers from parties including the Liberals and Just Free Colombia have called for criminal charges to be brought against those who commit or encourage acts of vandalism or property damage during demonstrations.
The national strike committee, made up of major unions and student groups, has proposed a law to establish strict protocols for policing at protests, after widespread accusations of violent abuse by officers.
The group has also proposed a one-year basic income, equivalent to the minimum wage, for 7.5 million households affected by the pandemic.
(Reporting by Carlos Vargas; Writing by Julia Symmes Cobb; Editing by Nelson Bocanegra, Julia Symmes Cobb and Daniel Wallis)
