20180620-法国巴黎银行-Colombia_s_election__Duque_rules_8页_407kb

Colombia's Election: Duque Rules

Core Content

Colombia's presidential election resulted in a decisive victory for the centre-right candidate Iván Duque, who is expected to implement a pro-growth agenda. His win, with a margin of 12pp, combined with a right-leaning Congress, positions him well to advance his economic policies and reforms.

Main Points

• Election Outcome: Iván Duque won the presidential election with a significant margin, indicating strong public and political support.
• Pro-Growth Agenda: Duque's platform includes market-friendly policies such as reducing red tape, lowering taxes, and deregulation. These measures are expected to improve business sentiment and boost demand for capital and durable goods.
• Cabinet Appointments: Duque will take office on 7 August and is expected to announce his cabinet, with the appointment of the finance minister being particularly significant. Potential candidates include Alberto Carrasquilla and Felipe Restrepo.
• Fiscal Policy: Duque will inherit an incomplete fiscal adjustment. While he plans to reduce tax evasion by 50% and increase job formalisation, he may loosen the fiscal rule, which targets a 1.6pp reduction in the public sector deficit by 2022. In the short term, the government is expected to focus on spending cuts before implementing tax reductions.
• Social Security Reform: The new administration will face pressure to reform the social security system, which currently accounts for about 4pp of GDP in government expenditure. The reforms aim to target subsidies for rich families and focus on the needs of the poor.
• Energy Sector Reforms: Duque's energy policy is expected to attract private and foreign investment by reducing contract uncertainty. This contrasts with his opponent, Petro, who proposed to democratise the sector and block new exploration permits through local referendums.
• Political Support: Duque's coalition in the second-round election included support from major political parties such as the Liberals and Conservatives, strengthening his position in Congress and enabling more effective agenda execution.

Key Information

• Economic Impact: Duque's policies could potentially boost GDP by 3pp per year if fully implemented, mainly through tax cuts and deregulation.
• Political Context: The right-leaning Congress and strong coalition support provide a solid foundation for Duque's legislative agenda.
• Challenges: Despite the pro-growth stance, the government will need to address fiscal discipline and social security reform, which may have short-term economic implications.
• Regional Implications: Petro's performance, though not enough to win the presidency, could gain traction in regional elections, potentially influencing the 2022 election.

Charts Mentioned

• Chart 1: Industrial confidence and production (annualised percentage change)
• Chart 2: Lower House (2018-22), second-round coalition

Legal and Regulatory Disclaimer

This document is a marketing communication and not investment research. It is intended for professional clients and eligible counterparties. It may contain research content and is subject to legal restrictions and disclaimers under MiFID II and other financial regulations. BNPP may have conflicts of interest and may engage in transactions inconsistent with the views expressed in the document. The information provided is for informational purposes only and should not be relied upon as authoritative or as a basis for investment decisions. No assurance is given regarding the accuracy or completeness of the information, and all estimates and opinions are subject to change. The document may also include performance data based on back-testing, which is for illustrative purposes only and does not reflect actual market conditions.

Regional Disclosures

• United States: The document contains important disclosures regarding options, ETFs, and securities not registered under US law. It is distributed only to qualified institutional buyers or non-US persons.
• UK: The document is communicated by BNPP London Branch, which is authorised and supervised by the ECB and ACPR.
• France: The report is produced and distributed by BNPP SA and BNPP Arbitrage, both authorised and supervised by the ECB and ACPR.
• Germany: Distributed by BNPP S.A. Niederlassung Deutschland, under ECB and ACPR supervision, with limited regulation by BaFin.
• Belgium: BNPP Fortis SA/NV is authorised and supervised by the ECB and National Bank of Belgium.
• Ireland: The report is distributed by BNPP S.A., Dublin Branch, under ECB and ACPR supervision.
• Italy: Distributed by BNPP Succursale Italia, which is authorised and supervised by ECB and ACPR, with limited regulation by the Bank of Italy and CONSOB.
• Netherlands: Distributed by BNPP Fortis SA/NV, Netherlands Branch, under ECB, National Bank of Belgium, and AFM supervision.
• Portugal: BNPP - Sucursal em Portugal is authorised and supervised by ECB and ACPR, with limited regulation by Banco de Portugal and Comissão do Mercado de Valores Mobiliários.
• Spain: The report is distributed by BNPP S.A., S.E., a branch of BNPP S.A., under ECB and ACPR supervision.

Conclusion

Iván Duque's election signals a shift towards pro-growth and market-friendly policies in Colombia, supported by a right-leaning Congress. His agenda includes fiscal reforms, social security adjustments, and energy sector improvements, which could have both positive and challenging economic implications. The document serves as a political and economic analysis, with important legal and regulatory disclaimers for compliance with financial regulations in various jurisdictions.