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Colombia: Markets Favor Santos

With Alvaro Uribe out of the running for Colombia's presidency, investors now pin their hopes on Juan Manuel Santos.


With the news that Colombia’s Constitutional Court has ruled that President Alvaro Uribe cannot hold a referendum to run for a third term, investors are looking at other likely candidates for the May presidential elections.

And topping the list is Juan Manuel Santos, a longtime ally of Uribe who has held several key government posts, including as minister of commerce, finance and defense.

”We think that markets would react positively to a Presidency of former Minister Santos,” Alberto J. Bernal-León, head of research at Bulltick Capital Markets, said in a commentary to clients. “All of Wall Street knows Juan Manuel Santos personally, and all of Wall Street knows his likely future finance minister, Juan Carlos Echeverry.”


Santos, 58, studied economics and public administration at London School of Economics and Harvard. He has won praise for the 2008 Hollywood-like rescue of hostages held by the terrorist group FARC and was also widely respected in his previous government roles.

Echeverry holds a PhD in economics from
New York University and has also studied in Germany and Spain. He was part of the economic team that helped stabilize Colombia’s economy in the late 1990s.


Santos is expected to get the official support from Uribe, which will help boost his chances. So far, Santos has been leading all polls excluding a run by Uribe. According to one poll this month by Centro Nacional de Consultoría, Santos would get 18 percent of the vote, ahead of former Medellin mayor Sergio Fajardo at 12 percent and former foreign minister Noemí Sanín at 11 percent. Gustavo Petro from the radical Polo Democratico party garnered support from 9 percent of the likely voters.

”If the President were to be Fajardo, Sanin, [German] Vargas Lleras, or even Rafael Pardo (Liberal party), the market reaction would likely be neutral, because all of those names imply a continuation of Uribe government plan of security and investor confidence,” Bernal said. “We think that a scenario in which Gustavo Petro wins the presidency would imply that
Colombia would move from being a "150 basis point country risk story" to a "700+ basis point country risk sovereign. “

The probability of Petro winning is low, but it is not zero, he adds.


Fajardo, 53, won widespread praise for his radical transformation of Medellin from a basket case world-famous for crime to a city winning international competitions as a role model for urban reforms.  

He defines himself as independent and has sent mixed signals on business and economic policy. While Fajardo supports trade (he doesn’t call it “free trade”), during a meeting with foreign media at his campaign headquarters in Medellin last year he refused to answer two questions by Latin Business Chronicle about whether he would raise corporate taxes if he were elected president in Colombia.

Sanin, 60, is a former foreign and communications minister of Colombia. She has also served as Colombia’s ambassador to the United Kingdom, Spain and Venezuela. She has previously run for president in 2002 and 1998 and will compete with Santos for the chance to represent the ruling coalition.


Although many foreign investors have expressed support for a third term for Uribe, many Colombian business leaders repeatedly opposed it. “We don’t deny that Uribe has been one of the best presidents in
Colombia [but] there are dozens of people [that also qualify to be president],” Luis Carlos Villegas, president of the powerful business organization ANDI, told Latin Business Chronicle last year. Gonzalo Restrepo, president of Colombia’s top retailer Exito, agrees. “It’s good and healthy that there’s a renovation,” he told Latin Business Chronicle. “Uribe is excellent [but] deserves a rest. Colombia has many other people that can serve.”


Despite the recent political uncertainty, foreign investors have consistently expressed strong optimism about Colombia.

"Historically, it is a country which has provided growth and adequate returns on investment, and we believe that 2010 will be no different,” Mauricio Nicholls, general manager for the Caribbean, Central America and Andean regions for Chevron Products Company, told Latin Business Chronicle in our country report earlier this month.



Uribe, who became president in 2002, has received strong praise among both local and foreign companies for his policies of improving security, which in turn boosted investor confidence. Those policies led to a 7.5 percent GDP expansion in 2007, the highest growth ever recorded. On average the Colombian economy grew by 5.3 percent in the six-year period 2002-07 before the global crisis started in 2008, according to a Latin Business Chronicle analysis of data from the International Monetary Fund. That compares with an average of 1.2 percent the previous six years (1998-2001).

In 2008 and 2009, the crisis led to a marked slowdown of 2.5 percent and minus 0.3 percent, respectively. This year, the economy will likely expand by 2.5 percent and next year another 4.0 percent, the IMF predicts.

Foreign direct investment also jumped under Uribe. In 2008 it reached $10.6 billion. That followed $9 billion in 2007 and compares with an average of $2.5 billion in the period 1994-2003, according to data from the United Nations.

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