Bloomberg Opinion — In the chaos of Latin American politics, Colombia has in recent years looked like an island of stability. Now change is certain. Sunday’s presidential election will be between two outsiders: the first viable leftist candidate in decades, and a populist construction magnate running on an anti-corruption ticket. The victor could do worse than to learn from the rise and slump of anti-establishment leaders elected elsewhere in the region. Without broad support and an eye on public finances, neither will deliver the improved living conditions voters have demanded.
Gustavo Petro, the former guerrilla now serving as senator, had been expected to win May’s first round, and he did — but his second round was supposed to be against conservative candidate Federico Gutierrez. Instead, thanks to a late-stage, social media-powered surge, Petro will face the querulous Rodolfo Hernandez, a businessman and former mayor. Polls are tight enough for some to predict that the “King of TikTok” may yet carry the day.
Neither option is necessarily good news for the economy. Investors have fretted about Petro’s interventionist agenda, which aims to reduce inequality with public spending and higher taxes. He wants to guarantee public-sector jobs for the unemployed, while also freezing new oil and gas exploration — a well-intentioned but rather abrupt change for a nation that’s so reliant on oil exports. Declining reserves mean it would cease to be self-sufficient before the end of the decade. Hernandez is seen as more business-friendly, promising austerity, but his policy proposals are eclectic and vague. A near-halving of VAT, the largest contributor to government revenue, would also do little to tame inflation. Both candidates have made worrisome noises about raising trade barriers.
Colombia, which lost its investment-grade status last year, can hardly afford such schemes. Although the economy has made a good recovery from Covid-19, deep-seated problems remain. A botched tax reform last year led to weeks of violent protests. Inequality is pronounced even by the standards of the neighborhood — the Organization for Economic Cooperation and Development estimates it would take 11 generations to rise from the bottom 10% of Colombian society to the average income — and the informal sector that helped drive that quick economic convalescence will now hold Colombia back.
The new president must attempt to soothe nerves with an experienced, technocratic finance minister and begin to unpick the country’s Gordian knots, such as a tax system that currently overburdens companies but still stretches to meet social demands. Unimpressive productivity will improve with lighter regulations for startups and reduced protectionism. But accelerating growth requires a cool head.
Other anti-establishment hopefuls in the region offer a warning. Pedro Castillo, elected president of Peru in 2021, never widened his base and is floundering as his already troubled economy is hit with soaring inflation. Chile’s Gabriel Boric is doing better at building up support, but his popularity still stands at 44%, barely half a year after an election he easily won (in large part because of a more moderate swerve). Brazil’s populist president Jair Bolsonaro may be the closest equivalent to Hernandez, but thanks to inept policy making and divisiveness has failed to deliver on most of his pro-business promises.
Risks in Colombia are even greater, given fragile institutions, high levels of distrust, and the specter of violence. Hernandez faces a corruption trial. Both candidates will chafe against checks and balances, struggle with budget rigidities, and, most of all, with a divided Congress, where Petro has a minority of seats and Hernandez has almost no presence.
Populism is a poor remedy for Colombia’s ills.
The Editors are members of the Bloomberg Opinion editorial board.