Colombia's Economic Jitters Ease As Petro's Tax Defeat Reshapes The Debate

(MENAFN- The Rio Times) Key Points

• Colombia's economic-policy jitters eased in November, but uncertainty is still more than double“normal” levels.
  
• Lower inflation and clearer election races calmed nerves, just as Congress killed a major tax plan.
  
• For investors and expats, the big story is whether fiscal discipline wins out over ambitious but risky policy experiments.
  

The most recent shock in Bogotá was Congress's decision to bury President Gustavo Petro's latest tax reform, a package designed to raise about 16.3 trillion pesos and help fund the 2026 budget.

For companies and markets, the immediate relief is clear: one more round of surprise tax hikes has been taken off the table, at least for now. For the government, it leaves a large hole in the budget and exposes how fragile its support in Congress has become.

This political clash lands just as Colombia's Economic Policy Uncertainty Index, the IPEC compiled by Fedesarrollo, finally comes off extreme levels.

In November, the index fell to 216 points, down 55 points from October's spike at 271 and slightly below the 219 registered in November 2024.

Yet it still stands more than twice the long-term average of 100 seen between 2000 and 2019, and Colombia has now spent over seven years above that old“normal.”



The IPEC is based on how often newspapers talk about taxes, reforms, inflation, strikes, legal battles and similar themes. In November, just over half of the news that fed the index was about economic, social and geopolitical policy.

Another fifth came from real-economy stories on growth and jobs, with financial-market topics and miscellaneous issues each close to 12%. Security barely counted.
Colombia Eases from Panic but Faces Fiscal Tests
The picture is a country worried less about street crime and more about the rules of the game for business, investment and public spending.

What pushed uncertainty down? First, the inflation story improved. A very low monthly reading nudged annual inflation to around 5.3%, easing pressure on the central bank to keep interest rates painfully high.

When prices look more predictable, media headlines become less alarmist about monetary policy. Second, the electoral calendar is settling. Parties have defined their congressional lists, and the field for the 2026 presidential race is narrowing.

Fewer unknown figures and fewer radical proposals mean less noise about dramatic policy swings. The message is mixed but important. Colombia is no longer in full panic mode, yet it is far from calm.

The defeat of the tax reform shows that there are limits to how far ambitious policy can go when it collides with fiscal reality and a skeptical Congress.

The next tests - minimum-wage talks, central-bank decisions, and a tighter budget - will show whether the country moves toward clearer, rules-based management or slides back into improvisation.

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