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Colombia: Santos Strengthens, Business Happy

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Juan Manuel Santos is now the clear frontrunner in the presidential runoff. Local and foreign investors are happy.

 

BY CHRONICLE STAFF

The victory of Juan Manuel Santos in Sunday’s first round of presidential elections in Colombia boosted the country's bonds, but also optimism among local and foreign investors about the outlook.

Although Santos' top rival, Antanas Mockus, is considered market-friendly, most investors prefer the former. “We do consider that there is ample room to make the argument that Juan Manuel Santos winning the election would imply the existence of a higher rate of potential economic growth,” Alberto Bernal, Head of Research at Bulltick Capital Markets, says in an analysis. “Santos knows the market, and the markets know Santos very well. Foreign direct investment could be larger under a Santos administration.”

DEALING WITH CONGRESS

Additionally,
Santos controls the Congress, and he knows how to negotiate the approval of reforms, while Mockus is more "authoritarian," he argues.

Santos won the first round of elections, with 46.5 percent of the votes versus Mockus, with only 21.4 percent. The two will face off in a second round on June 20. Santos is a former finance, commerce and defense minister and leader of the U Party, which is the largest political party in Colombia. Mockus is a former mayor of Bogota and the candidate of the small Green Party.

IHS Global Insight warned last week that Mockus’ weak representation in Congress would hurt him if he won the presidency as he would need to pass key fiscal and other reforms. “His weak position in the incoming Congress puts a question mark over his ability to successfully tackle the problems on the agenda of the next Colombian president, including contentious fiscal and healthcare reform packages,” it said in an analysis.

GDP GROWTH


Last, but not least,
Santos has a better plan to boost economic growth compared to the plan introduced by Antanas Mockus, Bernal argues. “We think that the economic advisors of Juan Manuel Santos are better than the advisors of Antanas Mockus,” he adds.

However, IHS Global Insight warns of one negative with
Santos. “There is a risk that relations with Venezuela will remain tense, at least over the short term, should Santos emerge as the winner,” it warned today. That means that Venezuela may extend its boycott of Colombian imports, it says.


Despite polls predicting a tight race, Bernal accurately forecasted a win for
Santos.

CLEAR FAVORITE

Now, Bernal and other experts see the likelihood of
Santos winning the runoff as extremely high. He points to the probability that the Cambio Radical party (German Vargas Lleras), and the conservative party – members of the outgoing coalition of President Alvaro Uribe – will support Santos and believes that will also be the case with many members of the opposition Liberal Party.

IHS Global Insight agrees. ”While Mockus will struggle to win the necessary additional support for reviving his presidential ambitions, the impressive scale of Santos’s first-round victory and the strong legislative position of the ruling Party of the U will boost Santos’s leverage over other sectors of the former Uribista coalition, making the former defence minister the firm favourite for the June run-off round,” it says.


Yet, even if Mockus were to win the second round, investors need not worry, Bernal says. “Both candidates are free marketers and fiscal hawks, and both despise the so-called Socialism of the 21st century,” Bernal says. “Both candidates will maintain the relationship of
Colombia with the US at the same level, and both candidates have no choice but to maintain the democratic security policy of the Uribe administration.”

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