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Bernal: Antanas Mockus Market-Friendly

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Antanas Mockus is market-friendly and would largely continue President Alvaro Uribe's policies.


BY ALBERTO BERNAL

The latest poll out of Colombia is showing that Juan Manuel Santos, the preferred market candidate, is no longer the most probable winner of the 2010 Presidential election. Rather, former Bogota mayor Antanas Mockus, a mathematician of Lithuanian decent, is polling in first place in the latest second round election simulation. Here is the bottom-line for the markets. We consider that if Juan Manuel Santos were to be the next President of Colombia, then Uribe’s policies would be continued with 95 percent intensity. On the other hand, if Antanas Mockus is the next president, then the policies of Uribe would be followed with 75-80 percent intensity. In our view, Antanas Mockus would be less “stubborn” with the FARC compared to how President Uribe has been since his inauguration eight years ago and compared to Juan Manuel Santos --being “stubborn” with the FARC means not succumbing to the temptation of following a prisoner exchange. In terms of economic policies, the differences are subtle. Both Santos and Mockus are quite market friendly, and their choice of Finance Minister will likely portray such economic view. That said, the markets would welcome more Santo’s likely Finance Minister (Juan Carlos Echeverry) than Mockus’s possible Finance Minister (Salomon Kalmanovitz). We maintain all our long-term forecasts on Colombia unchanged.

THE DARK-HORSE SHOWS UP AGAIN

The market consensus, and our own view, that Juan Manuel Santos was looking like a “shoo-in” in this Presidential election appears to be faltering at this time. The latest information out of the opinion surveys delivers that Antanas Mockus, the Presidential candidate for the Green Party, has gained an impressive amount of support among Colombian voters, especially young professionals and high income individuals. According to the local pundits, the poor continue to endorse, for the most part, Juan Manuel Santos. A very good piece of news for the market is that presidential candidate Gustavo Petro, from the Polo Democratico, the Colombian political party that is most closely aligned with the ideology of Hugo Chavez, continues to poll very bearishly (at around 5% of voter preferences). We think that despite the latest polls, Juan Manuel Santos continues to have an edge over Mockus because he has a strong political machinery behind him.

 

According to the latest Gallup poll numbers published on Wednesday (we consider that the Gallup poll numbers are the most accurate ones available), followed among 1,200 voting adults from all around the country, former Minister of Defense Juan Manuel Santos continues to lead the vote count in the first round simulation with 34.2 percent of the vote (April 22-25 polling sample).

This time around the former defense minister received literally the same amount of voter support compared to the March 20-22 measure. Green Party candidate Antanas Mockus now has 31.6 percent  of the voting preferences, compared to only 10.4 percent in the March reading; and Noemi Sanin (official candidate of the Conservative Party) now has 16.2 percent of the vote, compared to the 23.3 percent that she had last month. Gustavo Petro, from the Polo Democratico (left-wing party) now has 5 percent of the vote compared to the 6.2 percent  that he had last month.

In terms of the second round simulations, according to the latest poll Antanas Mockus would be the next president of Colombia if the elections were to take place today. The Gallup poll shows that Mockus would receive 47.9 percent of the vote compared to 42.2 percent of the vote that Santos would receive. This latest poll delivers a major twist in voter preferences compared to the March simulation, when Santos was receiving 53.8 percent of the vote compared to the 31.2 percent of Antanas Mockus. Local pundits continue to argue that the “a-political” image that Mockus portraits to the public has helped him to gain support among Uribe supporters, ones that want continuity in security policies, yet want to see some change in economic policy and in the management of the political game (some voters want to see increased levels of transparency in politics). Many voters in Colombia believe that the Uribe administration became increasingly corrupt during its second term.

As we argued in our last monthly, Antanas Mockus is a person that could be characterized as being somewhat eccentric –because of incidents such as getting married in a circus, taking the bike to the office with the bodyguards following in a car, dressing up as “Super-Mockus” to give an example on not throwing trash on the streets, or mooning an audience of rebellious university students. That said, the track record of Mockus as a public official is very impressive. Antanas Mockus delivered when he was major of Bogota, via changing the culture of the city, and via leaving a very positive fiscal position to the next major, Enrique Peñaloza (who is also endorsing Mockus). Antanas Mockus is widely regarded by the citizens of Bogota as being the genesis of the positive change that Bogota has seen since the middle of the 1990’s.

We are hearing from locals that former Central Bank governor Salomon Kalmanovitz could be the next Finance Minister, if Mockus wins the Presidency. Dr. Kalmanovitz is an economist that has been very critical of the Uribe administration, yet he is widely regarded –by locals—as being a very serious and orthodox economic thinker. Correval, a very important local broker dealer, recently published a summary of the policy views of Dr. Kalmanovitz. In that document, Correval explains that a structural tax reform that reduces the income tax level yet takes away loopholes would be a priority. In addition, Dr. Kalmanovitz believes that payroll taxes should be progressively eliminated via the closing up of the loopholes and the increased level of economic activity that would come about from the process of reducing the size of the black economy. We would characterize Dr. Kalmanovitz as being a fiscal conservative. Dr. Kalmanovitz has no strong opinions with respect to the current level of the FX rate (e.g. the implementation of capital controls is not in the agenda), and Dr. Kalmanovitz supports the independence of the Central Bank board.

Regardless of the qualifications of Dr. Kalmanovitz, we think that the markets would feel more comfortable with Juan Manuel Santos winning the presidency because Juan Carlos Echeverry would likely be appointed as Finance Minister. Dr. Echeverry is a very well known economist (in the local and international financial system) who holds very strong orthodox fiscal and monetary views.

Alberto J. Bernal-León is Head of Research at Bulltick Capital Markets. This column is based on an analysis he sent to clients.

 

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