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Colombian budget proposals

31 July 2019 Arthur Dhont

The Colombian government presented on 28 July its 2020 budget proposal to Congress to increase government spending by more than 9% to approximately USD84 billion. Budget rises of 10-23% are planned for the ministries of finance, employment, justice, and the interior. Conversely, the ministries of mining and energy, agriculture, and transport face budget cuts of 38%, 27%, and 7% respectively. The budget proposal must be approved by Congress by 20 October.

The 2019 budget, the first presented by the Iván Duque administration, eventually was passed on 17 October 2018 following several months of debate and nearly 300 proposed amendments. Since then, the government's position has weakened, having effectively lost its Congressional majority after coalition partner Party of the U (Partido de la U) legislators defected towards a new political alliance announced in April 2019 together with the Liberal Party (Partido Liberal: PL) and Radical Change (Cambio Radical: CR). This left the government with 58 of 178 seats in the House of Representatives and 40 of 108 Senate seats.

Significance

The substantial budget cuts planned at the ministries of mining and energy, agriculture, and transport indicate policy reversal away from the government's prior commitment to attract greater investment to the sectors overseen by these ministries. In turn, this suggests that there will be slower progress with policy initiatives needed to establish an improved business environment in these areas, including the development of a legal and regulatory framework around fracking, the establishment of a land registry for mining activity, and an improved legal and regulatory framework to accelerate completion of the USD15-billion 4G road infrastructure project started in 2014 under the previous Juan Manuel Santos administration.

Early agreement on budget priorities with the PL, Party of the U, and CR would provide the government with an ample majority to pass the budget, reducing the risk of the budget being delayed or heavily amended. Conversely, if the PL, Party of the U, and CR align themselves with the left-of-center opposition, these parties will have substantial scope to reshape the budget

Posted 31 July 2019 by Arthur Dhont, Senior Analyst, Latin America

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