Political Risk Index Summer 2021 (gated) containing 67 chapters.
Chapter 18 of 67.
Political Risk Index Summer 2021 (gated) containing 67 chapters.
Chapter 18 of 67.
ColombiaRead on
Political Risk Index Summer 2021 (gated) containing 67 chapters.
Chapter 18 of 67.
ColombiaRead on
Political Risk Index Summer 2021 (gated) containing 67 chapters.
Chapter 18 of 67.
ColombiaRead on
Colombia
Risk Temperature
63 (Significant)
TREND ►
Despite having implemented some of the world’s longest-lasting COVID-19 lockdown measures in 2020, Colombia has struggled to bring the pandemic under control. With nearly 3 million confirmed cases and an official death toll of more than 76,000, the country is among the world’s worst-affected to date; Bogotá and some coastal areas have been particularly badly hit. The national statistics agency, DANE, estimates national gross domestic product (GDP) to have contracted by 6.8% in 2020, and while vaccines now offer some hope of restarting economic activity, vaccine roll-out is still very much in its early stages.
On March 1 2021, Colombia became the first country in the Americas to receive a shipment of vaccines through the COVID-19 Vaccine Global Access (COVAX) programme. Orders have also been placed with several other suppliers. As of May 2, however, less than 7% of the country’s 50 million people had received a dose of vaccine. Roll-out faces difficulties due to shipment delays, crime, insecurity and logistics, with challenging topography and poor infrastructure hindering deliveries of vaccines to remote areas.
On March 1 2021, Colombia became the first country in the Americas to receive a shipment of vaccines through the COVID-19 Vaccine Global Access (COVAX) programme. Orders have also been placed with several other suppliers. As of May 2, however, less than 7% of the country’s 50 million people had received a dose of vaccine. Roll-out faces difficulties due to shipment delays, crime, insecurity and logistics, with challenging topography and poor infrastructure hindering deliveries of vaccines to remote areas.
Slow vaccine roll-out will impede Colombia’s economic reopening, with the effects of lockdown restrictions on businesses likely to endure beyond 2021. Unemployment stood at 14.2% in March 2021, according to DANE, an improvement on previous months but still up 1.6 percentage points on March 2020. Sectors such as tourism, which pre-pandemic had begun to gain momentum, have been all but stopped in their tracks, and will take time to recover.
Slow vaccine roll-out will impede Colombia’s economic reopening, with the effects of lockdown restrictions on businesses likely to endure beyond 2021. Unemployment stood at 14.2% in March 2021, according to DANE, an improvement on previous months but still up 1.6 percentage points on March 2020. Sectors such as tourism, which pre-pandemic had begun to gain momentum, have been all but stopped in their tracks, and will take time to recover.
The government was forced on May 2 2021 to withdraw fiscal reform proposals, which triggered a national strike and days of major protests across the country. Dozens of deaths were reported due to the unrest. While the pandemic has made the already sensitive issue of reform even more so, it has also made it more urgent. The fiscal deficit increased to 7.8% of GDP in 2020, from 2.5% in 2019, and is expected to reach 8.1% in 2021. The government had hoped to increase tax revenues by COP23.4tn (USD6.4bn) to alleviate the financial pressures caused by the crisis. All three major ratings agencies have a negative outlook for Colombia. The country’s investment-grade credit rating is at risk.
Anti-reform protests quickly broadened into protests over myriad other issues, including security failings and human rights challenges. The situation is likely to weigh further on the popularity of Duque’s Centro Democratico (Democratic Centre, DC) as attention begins to turn to the 2022 presidential and congressional elections. The pandemic halted rising complaints from former members of the Fuerzas Armadas Revolucionarias de Colombia (Revolutionary Armed Forces of Colombia, FARC) about Duque’s failure to honour peacebuilding commitments made by his predecessor, but these will return to the fore, particularly given the government’s continuing failure to ensure the safety of demobilised combatants.
Regular killings of rural community leaders will further weigh on the prospects of successful peacebuilding in former conflict zones, as could specific scandals over military and government activities. Defence Minister Diego Molano, who was appointed in February after the death of his predecessor, Carlos Holmes Trujillo, has already found himself facing calls to resign due to his handling of an airstrike operation in March 2021, in which several children are thought to have been killed.
Regular killings of rural community leaders will further weigh on the prospects of successful peacebuilding in former conflict zones, as could specific scandals over military and government activities. Defence Minister Diego Molano, who was appointed in February after the death of his predecessor, Carlos Holmes Trujillo, has already found himself facing calls to resign due to his handling of an airstrike operation in March 2021, in which several children are thought to have been killed.
Meanwhile Colombia’s Jurisdicción Especial para la Paz (Special Peace Tribunal, JEP)- which was established as part of the 2016 peace deal to investigate conflict-era crimes- recently put the number of individuals thought to have been murdered by the state as ‘false positives’ in the 2000s at 6,402. This is nearly triple the figure previously acknowledged by the Attorney General’s Office.
The likely return of aerial coca eradication with glyphosate, a practice that was suspended in 2015 after years of protests over health concerns, will further aggravate social tensions, escalating levels of rural violence involving civilians, the military, criminal organisations and non-state armed groups. Although UN figures show that the area of Colombia under coca cultivation fell by 9% in 2019, the United States has presented figures showing that potential cocaine production was up by 8%. A global resurgence in cocaine demand as lockdown measures ease this year will do little to discourage the pursuit of aggressive anti-narcotics strategies by both Colombian and US authorities.
Expropriation Risk
42 (Medium-Low)
TREND ▲
Avianca, Colombia’s national airline and the second largest in Latin America, filed for Chapter 11 bankruptcy in the United States in May 2020, as the shutdown in aviation across the region added to its existing troubles. Having lost USD900mn in 2019, the airline lost USD1.09bn in 2020. The Colombian government, which sold its majority stake in the airline in 2004, offered in August 2020 to support the company’s restructuring with USD370mn of loans, a move that prompted strong criticism. Avianca nevertheless said in November 2020 that the loan would not be needed, as it had secured support from investors and lenders. A US bankruptcy court approved a USD2bn financing plan for the firm in October 2020.
Political Violence Risk
73 (Medium-High)
TREND ►
The onset of the COVID-19 pandemic stifled protests and simmering public frustration over a range of issues in late 2019 and in 2020. However, these came roaring back in late April 2021, triggered by the government’s fiscal reform proposal. Many of the pre-pandemic social, economic and political drivers of public anger are likely to have worsened during the crisis.
Heavy-handed responses by the security forces have exacerbated matters. The United Nations, the United States, the European Union and international human rights bodies have all expressed concern about the government’s handling of protests, while domestically, calls for police reform and the disbandment of the Mobile Anti Disturbance Squadron (ESMAD) have re-emerged. These could put the government (which ideologically favours tough security strategies) in an awkward position.
Heavy-handed responses by the security forces have exacerbated matters. The United Nations, the United States, the European Union and international human rights bodies have all expressed concern about the government’s handling of protests, while domestically, calls for police reform and the disbandment of the Mobile Anti Disturbance Squadron (ESMAD) have re-emerged. These could put the government (which ideologically favours tough security strategies) in an awkward position.
Terrorism Risk
76 (High)
TREND ►
A car bombing in Corinto in March 2021 that injured 43 people has been attributed by the government to FARC dissidents, and serves as a stark reminder of the threats posed by non-state armed groups across the country. The government’s failure to protect demobilised former fighters is seeing many rearm, while the economic hardship of the pandemic and mass migration from crisis-stricken Venezuela has facilitated recruitment by criminal organisations.
The government’s refusal to engage in peace talks with the Ejército de Liberación Nacional (National Liberation Army, ELN), of which isin favour of aggressive military operations and now the country’s largest guerrilla group, counters efforts to encourage individual demobilisation and risks prolonging threats from that organisation. Military operations designed to weaken non-state armed groups may do so, but they also risk destabilising them, triggering violent power struggles and turf wars with rival groups that result in civilian casualties and exacerbate suffering.
Exchange Transfer and Trade Sanctions Risk
55 (Significant)
TREND ►
Having cut Colombia’s benchmark interest rate to a record low of 1.75% in September 2020, the central bank has kept it there since, in an effort to boost economic recovery and manage inflation. Annual inflation in April 2021 reached 1.95%, below the central bank’s target of 3% plus or minus one percentage point.
Meanwhile, the central bank has been increasing liquidity and urging commercial banks to extend repayment terms for smaller businesses. The Colombian peso lost 7% of its value against the US dollar during 2019. Having strengthened during the first months of 2020, the collapse of oil prices and COVID-19’s onset pushed the peso’s value down again. The currency has remained weak since, despite recovering oil prices. The pandemic is likely to weigh on economic recovery throughout 2021.
Meanwhile, the central bank has been increasing liquidity and urging commercial banks to extend repayment terms for smaller businesses. The Colombian peso lost 7% of its value against the US dollar during 2019. Having strengthened during the first months of 2020, the collapse of oil prices and COVID-19’s onset pushed the peso’s value down again. The currency has remained weak since, despite recovering oil prices. The pandemic is likely to weigh on economic recovery throughout 2021.
Sovereign Default Risk
47 (Medium)
TREND ►
Having raised the legal fiscal deficit limit for 2020 to 6.1% of GDP from 4.9% in April 2020, and 2.3% prior to the pandemic, the Fiscal Rule Advisory Committee agreed in June 2020 to suspend limits altogether until 2022. The pandemic saw the fiscal deficit increase to 7.8% of GDP in 2020.
On May 2, widespread unrest forced the government to withdraw fiscal reform proposals, which had intended to raise COP23.4tn (USD6.4bn). The government had hoped to raise rates and broaden the base of contributors for income tax, with a view to doubling the number of Colombians paying income tax by 2025. It will now review its proposals, but any changes are likely to be highly contentious.
On May 2, widespread unrest forced the government to withdraw fiscal reform proposals, which had intended to raise COP23.4tn (USD6.4bn). The government had hoped to raise rates and broaden the base of contributors for income tax, with a view to doubling the number of Colombians paying income tax by 2025. It will now review its proposals, but any changes are likely to be highly contentious.
The government still has access to an International Monetary Fund line of credit, and foreign reserves in February 2021 were at a record high of USD59bn. Significant levels of state spending will nevertheless continue to be necessary this year.
The government still has access to an International Monetary Fund line of credit, and foreign reserves in February 2021 were at a record high of USD59bn. Significant levels of state spending will nevertheless continue to be necessary this year.
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Colombia
Risk Temperature
63 (Significant)
TREND ►
Despite having implemented some of the world’s longest-lasting COVID-19 lockdown measures in 2020, Colombia has struggled to bring the pandemic under control. With nearly 3 million confirmed cases and an official death toll of more than 76,000, the country is among the world’s worst-affected to date; Bogotá and some coastal areas have been particularly badly hit. The national statistics agency, DANE, estimates national gross domestic product (GDP) to have contracted by 6.8% in 2020, and while vaccines now offer some hope of restarting economic activity, vaccine roll-out is still very much in its early stages.
On March 1 2021, Colombia became the first country in the Americas to receive a shipment of vaccines through the COVID-19 Vaccine Global Access (COVAX) programme. Orders have also been placed with several other suppliers. As of May 2, however, less than 7% of the country’s 50 million people had received a dose of vaccine. Roll-out faces difficulties due to shipment delays, crime, insecurity and logistics, with challenging topography and poor infrastructure hindering deliveries of vaccines to remote areas.
On March 1 2021, Colombia became the first country in the Americas to receive a shipment of vaccines through the COVID-19 Vaccine Global Access (COVAX) programme. Orders have also been placed with several other suppliers. As of May 2, however, less than 7% of the country’s 50 million people had received a dose of vaccine. Roll-out faces difficulties due to shipment delays, crime, insecurity and logistics, with challenging topography and poor infrastructure hindering deliveries of vaccines to remote areas.
Slow vaccine roll-out will impede Colombia’s economic reopening, with the effects of lockdown restrictions on businesses likely to endure beyond 2021. Unemployment stood at 14.2% in March 2021, according to DANE, an improvement on previous months but still up 1.6 percentage points on March 2020. Sectors such as tourism, which pre-pandemic had begun to gain momentum, have been all but stopped in their tracks, and will take time to recover.
Slow vaccine roll-out will impede Colombia’s economic reopening, with the effects of lockdown restrictions on businesses likely to endure beyond 2021. Unemployment stood at 14.2% in March 2021, according to DANE, an improvement on previous months but still up 1.6 percentage points on March 2020. Sectors such as tourism, which pre-pandemic had begun to gain momentum, have been all but stopped in their tracks, and will take time to recover.
The government was forced on May 2 2021 to withdraw fiscal reform proposals, which triggered a national strike and days of major protests across the country. Dozens of deaths were reported due to the unrest. While the pandemic has made the already sensitive issue of reform even more so, it has also made it more urgent. The fiscal deficit increased to 7.8% of GDP in 2020, from 2.5% in 2019, and is expected to reach 8.1% in 2021. The government had hoped to increase tax revenues by COP23.4tn (USD6.4bn) to alleviate the financial pressures caused by the crisis. All three major ratings agencies have a negative outlook for Colombia. The country’s investment-grade credit rating is at risk.
Anti-reform protests quickly broadened into protests over myriad other issues, including security failings and human rights challenges. The situation is likely to weigh further on the popularity of Duque’s Centro Democratico (Democratic Centre, DC) as attention begins to turn to the 2022 presidential and congressional elections. The pandemic halted rising complaints from former members of the Fuerzas Armadas Revolucionarias de Colombia (Revolutionary Armed Forces of Colombia, FARC) about Duque’s failure to honour peacebuilding commitments made by his predecessor, but these will return to the fore, particularly given the government’s continuing failure to ensure the safety of demobilised combatants.
Regular killings of rural community leaders will further weigh on the prospects of successful peacebuilding in former conflict zones, as could specific scandals over military and government activities. Defence Minister Diego Molano, who was appointed in February after the death of his predecessor, Carlos Holmes Trujillo, has already found himself facing calls to resign due to his handling of an airstrike operation in March 2021, in which several children are thought to have been killed.
Regular killings of rural community leaders will further weigh on the prospects of successful peacebuilding in former conflict zones, as could specific scandals over military and government activities. Defence Minister Diego Molano, who was appointed in February after the death of his predecessor, Carlos Holmes Trujillo, has already found himself facing calls to resign due to his handling of an airstrike operation in March 2021, in which several children are thought to have been killed.
Meanwhile Colombia’s Jurisdicción Especial para la Paz (Special Peace Tribunal, JEP)- which was established as part of the 2016 peace deal to investigate conflict-era crimes- recently put the number of individuals thought to have been murdered by the state as ‘false positives’ in the 2000s at 6,402. This is nearly triple the figure previously acknowledged by the Attorney General’s Office.
The likely return of aerial coca eradication with glyphosate, a practice that was suspended in 2015 after years of protests over health concerns, will further aggravate social tensions, escalating levels of rural violence involving civilians, the military, criminal organisations and non-state armed groups. Although UN figures show that the area of Colombia under coca cultivation fell by 9% in 2019, the United States has presented figures showing that potential cocaine production was up by 8%. A global resurgence in cocaine demand as lockdown measures ease this year will do little to discourage the pursuit of aggressive anti-narcotics strategies by both Colombian and US authorities.
Expropriation Risk
42 (Medium-Low)
TREND ▲
Avianca, Colombia’s national airline and the second largest in Latin America, filed for Chapter 11 bankruptcy in the United States in May 2020, as the shutdown in aviation across the region added to its existing troubles. Having lost USD900mn in 2019, the airline lost USD1.09bn in 2020. The Colombian government, which sold its majority stake in the airline in 2004, offered in August 2020 to support the company’s restructuring with USD370mn of loans, a move that prompted strong criticism. Avianca nevertheless said in November 2020 that the loan would not be needed, as it had secured support from investors and lenders. A US bankruptcy court approved a USD2bn financing plan for the firm in October 2020.
Political Violence Risk
73 (Medium-High)
TREND ►
The onset of the COVID-19 pandemic stifled protests and simmering public frustration over a range of issues in late 2019 and in 2020. However, these came roaring back in late April 2021, triggered by the government’s fiscal reform proposal. Many of the pre-pandemic social, economic and political drivers of public anger are likely to have worsened during the crisis.
Heavy-handed responses by the security forces have exacerbated matters. The United Nations, the United States, the European Union and international human rights bodies have all expressed concern about the government’s handling of protests, while domestically, calls for police reform and the disbandment of the Mobile Anti Disturbance Squadron (ESMAD) have re-emerged. These could put the government (which ideologically favours tough security strategies) in an awkward position.
Heavy-handed responses by the security forces have exacerbated matters. The United Nations, the United States, the European Union and international human rights bodies have all expressed concern about the government’s handling of protests, while domestically, calls for police reform and the disbandment of the Mobile Anti Disturbance Squadron (ESMAD) have re-emerged. These could put the government (which ideologically favours tough security strategies) in an awkward position.
Terrorism Risk
76 (High)
TREND ►
A car bombing in Corinto in March 2021 that injured 43 people has been attributed by the government to FARC dissidents, and serves as a stark reminder of the threats posed by non-state armed groups across the country. The government’s failure to protect demobilised former fighters is seeing many rearm, while the economic hardship of the pandemic and mass migration from crisis-stricken Venezuela has facilitated recruitment by criminal organisations.
The government’s refusal to engage in peace talks with the Ejército de Liberación Nacional (National Liberation Army, ELN), of which isin favour of aggressive military operations and now the country’s largest guerrilla group, counters efforts to encourage individual demobilisation and risks prolonging threats from that organisation. Military operations designed to weaken non-state armed groups may do so, but they also risk destabilising them, triggering violent power struggles and turf wars with rival groups that result in civilian casualties and exacerbate suffering.
Exchange Transfer and Trade Sanctions Risk
55 (Significant)
TREND ►
Having cut Colombia’s benchmark interest rate to a record low of 1.75% in September 2020, the central bank has kept it there since, in an effort to boost economic recovery and manage inflation. Annual inflation in April 2021 reached 1.95%, below the central bank’s target of 3% plus or minus one percentage point.
Meanwhile, the central bank has been increasing liquidity and urging commercial banks to extend repayment terms for smaller businesses. The Colombian peso lost 7% of its value against the US dollar during 2019. Having strengthened during the first months of 2020, the collapse of oil prices and COVID-19’s onset pushed the peso’s value down again. The currency has remained weak since, despite recovering oil prices. The pandemic is likely to weigh on economic recovery throughout 2021.
Meanwhile, the central bank has been increasing liquidity and urging commercial banks to extend repayment terms for smaller businesses. The Colombian peso lost 7% of its value against the US dollar during 2019. Having strengthened during the first months of 2020, the collapse of oil prices and COVID-19’s onset pushed the peso’s value down again. The currency has remained weak since, despite recovering oil prices. The pandemic is likely to weigh on economic recovery throughout 2021.
Sovereign Default Risk
47 (Medium)
TREND ►
Having raised the legal fiscal deficit limit for 2020 to 6.1% of GDP from 4.9% in April 2020, and 2.3% prior to the pandemic, the Fiscal Rule Advisory Committee agreed in June 2020 to suspend limits altogether until 2022. The pandemic saw the fiscal deficit increase to 7.8% of GDP in 2020.
On May 2, widespread unrest forced the government to withdraw fiscal reform proposals, which had intended to raise COP23.4tn (USD6.4bn). The government had hoped to raise rates and broaden the base of contributors for income tax, with a view to doubling the number of Colombians paying income tax by 2025. It will now review its proposals, but any changes are likely to be highly contentious.
On May 2, widespread unrest forced the government to withdraw fiscal reform proposals, which had intended to raise COP23.4tn (USD6.4bn). The government had hoped to raise rates and broaden the base of contributors for income tax, with a view to doubling the number of Colombians paying income tax by 2025. It will now review its proposals, but any changes are likely to be highly contentious.
The government still has access to an International Monetary Fund line of credit, and foreign reserves in February 2021 were at a record high of USD59bn. Significant levels of state spending will nevertheless continue to be necessary this year.
The government still has access to an International Monetary Fund line of credit, and foreign reserves in February 2021 were at a record high of USD59bn. Significant levels of state spending will nevertheless continue to be necessary this year.
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Colombia
Risk Temperature
63 (Significant)
TREND ►
Despite having implemented some of the world’s longest-lasting COVID-19 lockdown measures in 2020, Colombia has struggled to bring the pandemic under control. With nearly 3 million confirmed cases and an official death toll of more than 76,000, the country is among the world’s worst-affected to date; Bogotá and some coastal areas have been particularly badly hit. The national statistics agency, DANE, estimates national gross domestic product (GDP) to have contracted by 6.8% in 2020, and while vaccines now offer some hope of restarting economic activity, vaccine roll-out is still very much in its early stages.
On March 1 2021, Colombia became the first country in the Americas to receive a shipment of vaccines through the COVID-19 Vaccine Global Access (COVAX) programme. Orders have also been placed with several other suppliers. As of May 2, however, less than 7% of the country’s 50 million people had received a dose of vaccine. Roll-out faces difficulties due to shipment delays, crime, insecurity and logistics, with challenging topography and poor infrastructure hindering deliveries of vaccines to remote areas.
On March 1 2021, Colombia became the first country in the Americas to receive a shipment of vaccines through the COVID-19 Vaccine Global Access (COVAX) programme. Orders have also been placed with several other suppliers. As of May 2, however, less than 7% of the country’s 50 million people had received a dose of vaccine. Roll-out faces difficulties due to shipment delays, crime, insecurity and logistics, with challenging topography and poor infrastructure hindering deliveries of vaccines to remote areas.
Slow vaccine roll-out will impede Colombia’s economic reopening, with the effects of lockdown restrictions on businesses likely to endure beyond 2021. Unemployment stood at 14.2% in March 2021, according to DANE, an improvement on previous months but still up 1.6 percentage points on March 2020. Sectors such as tourism, which pre-pandemic had begun to gain momentum, have been all but stopped in their tracks, and will take time to recover.
Slow vaccine roll-out will impede Colombia’s economic reopening, with the effects of lockdown restrictions on businesses likely to endure beyond 2021. Unemployment stood at 14.2% in March 2021, according to DANE, an improvement on previous months but still up 1.6 percentage points on March 2020. Sectors such as tourism, which pre-pandemic had begun to gain momentum, have been all but stopped in their tracks, and will take time to recover.
The government was forced on May 2 2021 to withdraw fiscal reform proposals, which triggered a national strike and days of major protests across the country. Dozens of deaths were reported due to the unrest. While the pandemic has made the already sensitive issue of reform even more so, it has also made it more urgent. The fiscal deficit increased to 7.8% of GDP in 2020, from 2.5% in 2019, and is expected to reach 8.1% in 2021. The government had hoped to increase tax revenues by COP23.4tn (USD6.4bn) to alleviate the financial pressures caused by the crisis. All three major ratings agencies have a negative outlook for Colombia. The country’s investment-grade credit rating is at risk.
Anti-reform protests quickly broadened into protests over myriad other issues, including security failings and human rights challenges. The situation is likely to weigh further on the popularity of Duque’s Centro Democratico (Democratic Centre, DC) as attention begins to turn to the 2022 presidential and congressional elections. The pandemic halted rising complaints from former members of the Fuerzas Armadas Revolucionarias de Colombia (Revolutionary Armed Forces of Colombia, FARC) about Duque’s failure to honour peacebuilding commitments made by his predecessor, but these will return to the fore, particularly given the government’s continuing failure to ensure the safety of demobilised combatants.
Regular killings of rural community leaders will further weigh on the prospects of successful peacebuilding in former conflict zones, as could specific scandals over military and government activities. Defence Minister Diego Molano, who was appointed in February after the death of his predecessor, Carlos Holmes Trujillo, has already found himself facing calls to resign due to his handling of an airstrike operation in March 2021, in which several children are thought to have been killed.
Regular killings of rural community leaders will further weigh on the prospects of successful peacebuilding in former conflict zones, as could specific scandals over military and government activities. Defence Minister Diego Molano, who was appointed in February after the death of his predecessor, Carlos Holmes Trujillo, has already found himself facing calls to resign due to his handling of an airstrike operation in March 2021, in which several children are thought to have been killed.
Meanwhile Colombia’s Jurisdicción Especial para la Paz (Special Peace Tribunal, JEP)- which was established as part of the 2016 peace deal to investigate conflict-era crimes- recently put the number of individuals thought to have been murdered by the state as ‘false positives’ in the 2000s at 6,402. This is nearly triple the figure previously acknowledged by the Attorney General’s Office.
The likely return of aerial coca eradication with glyphosate, a practice that was suspended in 2015 after years of protests over health concerns, will further aggravate social tensions, escalating levels of rural violence involving civilians, the military, criminal organisations and non-state armed groups. Although UN figures show that the area of Colombia under coca cultivation fell by 9% in 2019, the United States has presented figures showing that potential cocaine production was up by 8%. A global resurgence in cocaine demand as lockdown measures ease this year will do little to discourage the pursuit of aggressive anti-narcotics strategies by both Colombian and US authorities.
Expropriation Risk
42 (Medium-Low)
TREND ▲
Avianca, Colombia’s national airline and the second largest in Latin America, filed for Chapter 11 bankruptcy in the United States in May 2020, as the shutdown in aviation across the region added to its existing troubles. Having lost USD900mn in 2019, the airline lost USD1.09bn in 2020. The Colombian government, which sold its majority stake in the airline in 2004, offered in August 2020 to support the company’s restructuring with USD370mn of loans, a move that prompted strong criticism. Avianca nevertheless said in November 2020 that the loan would not be needed, as it had secured support from investors and lenders. A US bankruptcy court approved a USD2bn financing plan for the firm in October 2020.
Political Violence Risk
73 (Medium-High)
TREND ►
The onset of the COVID-19 pandemic stifled protests and simmering public frustration over a range of issues in late 2019 and in 2020. However, these came roaring back in late April 2021, triggered by the government’s fiscal reform proposal. Many of the pre-pandemic social, economic and political drivers of public anger are likely to have worsened during the crisis.
Heavy-handed responses by the security forces have exacerbated matters. The United Nations, the United States, the European Union and international human rights bodies have all expressed concern about the government’s handling of protests, while domestically, calls for police reform and the disbandment of the Mobile Anti Disturbance Squadron (ESMAD) have re-emerged. These could put the government (which ideologically favours tough security strategies) in an awkward position.
Heavy-handed responses by the security forces have exacerbated matters. The United Nations, the United States, the European Union and international human rights bodies have all expressed concern about the government’s handling of protests, while domestically, calls for police reform and the disbandment of the Mobile Anti Disturbance Squadron (ESMAD) have re-emerged. These could put the government (which ideologically favours tough security strategies) in an awkward position.
Terrorism Risk
76 (High)
TREND ►
A car bombing in Corinto in March 2021 that injured 43 people has been attributed by the government to FARC dissidents, and serves as a stark reminder of the threats posed by non-state armed groups across the country. The government’s failure to protect demobilised former fighters is seeing many rearm, while the economic hardship of the pandemic and mass migration from crisis-stricken Venezuela has facilitated recruitment by criminal organisations.
The government’s refusal to engage in peace talks with the Ejército de Liberación Nacional (National Liberation Army, ELN), of which isin favour of aggressive military operations and now the country’s largest guerrilla group, counters efforts to encourage individual demobilisation and risks prolonging threats from that organisation. Military operations designed to weaken non-state armed groups may do so, but they also risk destabilising them, triggering violent power struggles and turf wars with rival groups that result in civilian casualties and exacerbate suffering.
Exchange Transfer and Trade Sanctions Risk
55 (Significant)
TREND ►
Having cut Colombia’s benchmark interest rate to a record low of 1.75% in September 2020, the central bank has kept it there since, in an effort to boost economic recovery and manage inflation. Annual inflation in April 2021 reached 1.95%, below the central bank’s target of 3% plus or minus one percentage point.
Meanwhile, the central bank has been increasing liquidity and urging commercial banks to extend repayment terms for smaller businesses. The Colombian peso lost 7% of its value against the US dollar during 2019. Having strengthened during the first months of 2020, the collapse of oil prices and COVID-19’s onset pushed the peso’s value down again. The currency has remained weak since, despite recovering oil prices. The pandemic is likely to weigh on economic recovery throughout 2021.
Meanwhile, the central bank has been increasing liquidity and urging commercial banks to extend repayment terms for smaller businesses. The Colombian peso lost 7% of its value against the US dollar during 2019. Having strengthened during the first months of 2020, the collapse of oil prices and COVID-19’s onset pushed the peso’s value down again. The currency has remained weak since, despite recovering oil prices. The pandemic is likely to weigh on economic recovery throughout 2021.
Sovereign Default Risk
47 (Medium)
TREND ►
Having raised the legal fiscal deficit limit for 2020 to 6.1% of GDP from 4.9% in April 2020, and 2.3% prior to the pandemic, the Fiscal Rule Advisory Committee agreed in June 2020 to suspend limits altogether until 2022. The pandemic saw the fiscal deficit increase to 7.8% of GDP in 2020.
On May 2, widespread unrest forced the government to withdraw fiscal reform proposals, which had intended to raise COP23.4tn (USD6.4bn). The government had hoped to raise rates and broaden the base of contributors for income tax, with a view to doubling the number of Colombians paying income tax by 2025. It will now review its proposals, but any changes are likely to be highly contentious.
On May 2, widespread unrest forced the government to withdraw fiscal reform proposals, which had intended to raise COP23.4tn (USD6.4bn). The government had hoped to raise rates and broaden the base of contributors for income tax, with a view to doubling the number of Colombians paying income tax by 2025. It will now review its proposals, but any changes are likely to be highly contentious.
The government still has access to an International Monetary Fund line of credit, and foreign reserves in February 2021 were at a record high of USD59bn. Significant levels of state spending will nevertheless continue to be necessary this year.
The government still has access to an International Monetary Fund line of credit, and foreign reserves in February 2021 were at a record high of USD59bn. Significant levels of state spending will nevertheless continue to be necessary this year.
Next ›
Next section »
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1 / 4
Colombia
Risk Temperature
63 (Significant)
TREND ►
Despite having implemented some of the world’s longest-lasting COVID-19 lockdown measures in 2020, Colombia has struggled to bring the pandemic under control. With nearly 3 million confirmed cases and an official death toll of more than 76,000, the country is among the world’s worst-affected to date; Bogotá and some coastal areas have been particularly badly hit. The national statistics agency, DANE, estimates national gross domestic product (GDP) to have contracted by 6.8% in 2020, and while vaccines now offer some hope of restarting economic activity, vaccine roll-out is still very much in its early stages.
On March 1 2021, Colombia became the first country in the Americas to receive a shipment of vaccines through the COVID-19 Vaccine Global Access (COVAX) programme. Orders have also been placed with several other suppliers. As of May 2, however, less than 7% of the country’s 50 million people had received a dose of vaccine. Roll-out faces difficulties due to shipment delays, crime, insecurity and logistics, with challenging topography and poor infrastructure hindering deliveries of vaccines to remote areas.
On March 1 2021, Colombia became the first country in the Americas to receive a shipment of vaccines through the COVID-19 Vaccine Global Access (COVAX) programme. Orders have also been placed with several other suppliers. As of May 2, however, less than 7% of the country’s 50 million people had received a dose of vaccine. Roll-out faces difficulties due to shipment delays, crime, insecurity and logistics, with challenging topography and poor infrastructure hindering deliveries of vaccines to remote areas.
Slow vaccine roll-out will impede Colombia’s economic reopening, with the effects of lockdown restrictions on businesses likely to endure beyond 2021. Unemployment stood at 14.2% in March 2021, according to DANE, an improvement on previous months but still up 1.6 percentage points on March 2020. Sectors such as tourism, which pre-pandemic had begun to gain momentum, have been all but stopped in their tracks, and will take time to recover.
Slow vaccine roll-out will impede Colombia’s economic reopening, with the effects of lockdown restrictions on businesses likely to endure beyond 2021. Unemployment stood at 14.2% in March 2021, according to DANE, an improvement on previous months but still up 1.6 percentage points on March 2020. Sectors such as tourism, which pre-pandemic had begun to gain momentum, have been all but stopped in their tracks, and will take time to recover.
The government was forced on May 2 2021 to withdraw fiscal reform proposals, which triggered a national strike and days of major protests across the country. Dozens of deaths were reported due to the unrest. While the pandemic has made the already sensitive issue of reform even more so, it has also made it more urgent. The fiscal deficit increased to 7.8% of GDP in 2020, from 2.5% in 2019, and is expected to reach 8.1% in 2021. The government had hoped to increase tax revenues by COP23.4tn (USD6.4bn) to alleviate the financial pressures caused by the crisis. All three major ratings agencies have a negative outlook for Colombia. The country’s investment-grade credit rating is at risk.
Anti-reform protests quickly broadened into protests over myriad other issues, including security failings and human rights challenges. The situation is likely to weigh further on the popularity of Duque’s Centro Democratico (Democratic Centre, DC) as attention begins to turn to the 2022 presidential and congressional elections. The pandemic halted rising complaints from former members of the Fuerzas Armadas Revolucionarias de Colombia (Revolutionary Armed Forces of Colombia, FARC) about Duque’s failure to honour peacebuilding commitments made by his predecessor, but these will return to the fore, particularly given the government’s continuing failure to ensure the safety of demobilised combatants.
Regular killings of rural community leaders will further weigh on the prospects of successful peacebuilding in former conflict zones, as could specific scandals over military and government activities. Defence Minister Diego Molano, who was appointed in February after the death of his predecessor, Carlos Holmes Trujillo, has already found himself facing calls to resign due to his handling of an airstrike operation in March 2021, in which several children are thought to have been killed.
Regular killings of rural community leaders will further weigh on the prospects of successful peacebuilding in former conflict zones, as could specific scandals over military and government activities. Defence Minister Diego Molano, who was appointed in February after the death of his predecessor, Carlos Holmes Trujillo, has already found himself facing calls to resign due to his handling of an airstrike operation in March 2021, in which several children are thought to have been killed.
Meanwhile Colombia’s Jurisdicción Especial para la Paz (Special Peace Tribunal, JEP)- which was established as part of the 2016 peace deal to investigate conflict-era crimes- recently put the number of individuals thought to have been murdered by the state as ‘false positives’ in the 2000s at 6,402. This is nearly triple the figure previously acknowledged by the Attorney General’s Office.
The likely return of aerial coca eradication with glyphosate, a practice that was suspended in 2015 after years of protests over health concerns, will further aggravate social tensions, escalating levels of rural violence involving civilians, the military, criminal organisations and non-state armed groups. Although UN figures show that the area of Colombia under coca cultivation fell by 9% in 2019, the United States has presented figures showing that potential cocaine production was up by 8%. A global resurgence in cocaine demand as lockdown measures ease this year will do little to discourage the pursuit of aggressive anti-narcotics strategies by both Colombian and US authorities.
Expropriation Risk
42 (Medium-Low)
TREND ▲
Avianca, Colombia’s national airline and the second largest in Latin America, filed for Chapter 11 bankruptcy in the United States in May 2020, as the shutdown in aviation across the region added to its existing troubles. Having lost USD900mn in 2019, the airline lost USD1.09bn in 2020. The Colombian government, which sold its majority stake in the airline in 2004, offered in August 2020 to support the company’s restructuring with USD370mn of loans, a move that prompted strong criticism. Avianca nevertheless said in November 2020 that the loan would not be needed, as it had secured support from investors and lenders. A US bankruptcy court approved a USD2bn financing plan for the firm in October 2020.
Political Violence Risk
73 (Medium-High)
TREND ►
The onset of the COVID-19 pandemic stifled protests and simmering public frustration over a range of issues in late 2019 and in 2020. However, these came roaring back in late April 2021, triggered by the government’s fiscal reform proposal. Many of the pre-pandemic social, economic and political drivers of public anger are likely to have worsened during the crisis.
Heavy-handed responses by the security forces have exacerbated matters. The United Nations, the United States, the European Union and international human rights bodies have all expressed concern about the government’s handling of protests, while domestically, calls for police reform and the disbandment of the Mobile Anti Disturbance Squadron (ESMAD) have re-emerged. These could put the government (which ideologically favours tough security strategies) in an awkward position.
Heavy-handed responses by the security forces have exacerbated matters. The United Nations, the United States, the European Union and international human rights bodies have all expressed concern about the government’s handling of protests, while domestically, calls for police reform and the disbandment of the Mobile Anti Disturbance Squadron (ESMAD) have re-emerged. These could put the government (which ideologically favours tough security strategies) in an awkward position.
Terrorism Risk
76 (High)
TREND ►
A car bombing in Corinto in March 2021 that injured 43 people has been attributed by the government to FARC dissidents, and serves as a stark reminder of the threats posed by non-state armed groups across the country. The government’s failure to protect demobilised former fighters is seeing many rearm, while the economic hardship of the pandemic and mass migration from crisis-stricken Venezuela has facilitated recruitment by criminal organisations.
The government’s refusal to engage in peace talks with the Ejército de Liberación Nacional (National Liberation Army, ELN), of which isin favour of aggressive military operations and now the country’s largest guerrilla group, counters efforts to encourage individual demobilisation and risks prolonging threats from that organisation. Military operations designed to weaken non-state armed groups may do so, but they also risk destabilising them, triggering violent power struggles and turf wars with rival groups that result in civilian casualties and exacerbate suffering.
Exchange Transfer and Trade Sanctions Risk
55 (Significant)
TREND ►
Having cut Colombia’s benchmark interest rate to a record low of 1.75% in September 2020, the central bank has kept it there since, in an effort to boost economic recovery and manage inflation. Annual inflation in April 2021 reached 1.95%, below the central bank’s target of 3% plus or minus one percentage point.
Meanwhile, the central bank has been increasing liquidity and urging commercial banks to extend repayment terms for smaller businesses. The Colombian peso lost 7% of its value against the US dollar during 2019. Having strengthened during the first months of 2020, the collapse of oil prices and COVID-19’s onset pushed the peso’s value down again. The currency has remained weak since, despite recovering oil prices. The pandemic is likely to weigh on economic recovery throughout 2021.
Meanwhile, the central bank has been increasing liquidity and urging commercial banks to extend repayment terms for smaller businesses. The Colombian peso lost 7% of its value against the US dollar during 2019. Having strengthened during the first months of 2020, the collapse of oil prices and COVID-19’s onset pushed the peso’s value down again. The currency has remained weak since, despite recovering oil prices. The pandemic is likely to weigh on economic recovery throughout 2021.
Sovereign Default Risk
47 (Medium)
TREND ►
Having raised the legal fiscal deficit limit for 2020 to 6.1% of GDP from 4.9% in April 2020, and 2.3% prior to the pandemic, the Fiscal Rule Advisory Committee agreed in June 2020 to suspend limits altogether until 2022. The pandemic saw the fiscal deficit increase to 7.8% of GDP in 2020.
On May 2, widespread unrest forced the government to withdraw fiscal reform proposals, which had intended to raise COP23.4tn (USD6.4bn). The government had hoped to raise rates and broaden the base of contributors for income tax, with a view to doubling the number of Colombians paying income tax by 2025. It will now review its proposals, but any changes are likely to be highly contentious.
On May 2, widespread unrest forced the government to withdraw fiscal reform proposals, which had intended to raise COP23.4tn (USD6.4bn). The government had hoped to raise rates and broaden the base of contributors for income tax, with a view to doubling the number of Colombians paying income tax by 2025. It will now review its proposals, but any changes are likely to be highly contentious.
The government still has access to an International Monetary Fund line of credit, and foreign reserves in February 2021 were at a record high of USD59bn. Significant levels of state spending will nevertheless continue to be necessary this year.
The government still has access to an International Monetary Fund line of credit, and foreign reserves in February 2021 were at a record high of USD59bn. Significant levels of state spending will nevertheless continue to be necessary this year.
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