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S P O T L I G H T

Iván Duque’s First One Hundred Days

What are the top five issues President-elect Duque should prioritize in his first one hundred days in office?

In one of the most consequential presidential elections in recent history, Colombians elected Iván Duque as their next president by a healthy twelve-point margin on June 17. In line with most predictions and election polls, uribismo regained power for the first time since former President Álvaro Uribe left office in 2010.

Unlike the 2014 election, where the peace process with the Revolutionary Armed Forces of Colombia (FARC) was arguably the defining issue, debates around this year’s presidential elections reflected an evolving set of priorities for Colombians. Polls consistently placed economic growth, employment, and the fight against corruption among the top-of-mind issues for Colombians ahead of the elections, reflecting active concerns by the average Colombian about quality of life.

With president-elect Duque set to take office on August 7 with healthy majorities in Congress, what can we expect from his presidency? How will he reactivate an economy that is just starting to recover from the deceleration experienced since the 2014 drop in oil prices?

Debates around this year’s elections

reflected an evolving set of priorities for Colombians.

In this Spotlight, we ask: What are the top five issues President-elect Duque should prioritize in his first one hundred days in office?

1Jumpstarting economic growth with Colombia now an OECD member

Jobs and economic growth were two of the most pressing concerns for Colombians during the elections. This is unsurprising, given that economic growth has gradually decreased. While the Colombian economy grew at a rate of over 4.5 percent between 2004 and 2014, the rate has halved in recent years, ending at 1.8 percent in 2017. This is due to a series of factors, but mainly the economy’s reliance on the oil and mining sectors, and unsustainable high prices.

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Colombia’s formal sector is about twice as productive as the informal sector. [Reuters]

As Colombia solidifies its presence in the global economy through the Pacific Alliance and now as a member of the Organization for Economic Cooperation and Development (OECD), it must further diversify beyond oil and mining exports. The sharp drop in oil prices laid bare the challenges of overdependence. Diversification can be achieved through a comprehensive strategy of combatting informality, fostering investment, and focusing on overall productivity increases.

Duque’s economic proposals laid clear a prominent focus on combating informality. That is a welcome step in the right direction. The informal sector is 50 percent less productive than the formal economy, making it crucial to reduce incentives to remain in the informal economy. An increase in female participation in the job market – currently 20 percentage points lower than male participation – must also be addressed. Informality also brings a pervasive effect on an increasingly unsustainable pension system suffering from low contributions and low coverage. An effort to reduce informality should go hand-in-hand with much-needed pension reform.

Duque has proposed a national productivity agenda focused on more effectively tying vocational education to the needs of the labor market. Productivity would further benefit from combating market inefficiencies and improving the provision of public goods such as infrastructure and health, and simplifying bureaucratic red tape. Tackling issues that restrict private sector performance and developing clusters to more deeply insert the Colombian economy into global supply chains would foster greater investment. Duque’s vow to simplify the tax code, a long overdue fix, should help in this regard.

Combating informality

and increasing women’s labor participation will be key in unleashing Colombia’s potential.

2Increasing state presence in rural areas and securing resources for peace accord implementation

Peace accord implementation is chugging along, albeit at a very slow pace. While Duque has expressed structural disagreements toward the FARC agreement, his criticism has revolved mainly around transitional justice and punishment for FARC leadership. Implementation of many of the reforms, therefore, should continue to advance. President-elect Duque will be faced with two key challenges: increasing state presence in rural areas previously controlled by the FARC and securing resources for implementation.

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Alberto Fujimori
Ramped up security and infrastructure investment will be crucial for hard-hit rural areas. [Reuters]

State presence in conflict-stricken areas, which are predominantly rural, has continued to lag behind even as implementation has advanced in other areas. New criminal actors have seized on the power vacuum created by FARC demobilization and established their own presence, worsening violence against social leaders. Over 280 have been assassinated since 2016, according to the Ombudsman's Office. Increased violence makes establishing the rule of law in these areas an even more crucial, if daunting, task for the incoming president. But there is no other choice.

Forward progress hinges on two factors: political will and resources. According to estimates by Fedesarrollo, the costs of developing infrastructure, reparations for victims of the armed conflict, and rural reform will require an investment of 0.6 percent of Colombia’s gross domestic product (GDP) over the next fifteen years. This comes on top of other necessary investments such as judicial reform, education and health investments, and institutional strengthening. While Duque has promised to assert more effective territorial control by enhancing police and military presence, any strategy should be accompanied by new, rural investment. Just as with economic growth, this means dedicating increased state resources – and such funds are best found by clamping down on tax evasion and working to make the tax system more progressive and competitive.

Colombia must expand state presence

in post-conflict zones, not just in terms of security, but also investment.

3Reforming the state to fight corruption and improve decentralization

Colombia has been hard-hit by recent corruption scandals, including the so-called Gown Cartel, the wide-reaching Odebrecht scandal, and the theft of resources from a government school nutrition program. Citizens have rightfully expressed indignation over such pervasive corruption within the state and the lack of accountability, making it an oft-discussed issue throughout the presidential run. Duque recognized this on the campaign trail, saying “there should not be a single concession for corrupt politicians.”

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The Colombian congress will need further reform to tackle deep-rooted clientelism. [Reuters]

Duque has promised to end the so-called mermelada, which are government transfers to regions outside of Bogotá shepherded by each regions’ respective members of Congress. Given the overly centralized nature of the Colombian state, such transfers are critical for the development of regions with different social and economic needs than those of Bogotá. However, this mechanism has been denounced for facilitating corruption and graft. While decentralization has advanced significantly since the 1991 Constitution, a deeper reform is needed to make it more effective. Revamping the way national government transfers are sent would go a long way toward tackling corruption, defanging clientelism, and increasing the effectiveness of local public investments.

To do so, Duque should push for the creation of development plans with a territorial focus, rather than the national development plan that the government drafts at the beginning of each term. This would allow the national government to implement differentiated strategies for local territories in a way that tailors to their specific needs. Additionally, local institutions must increase their fiscal capacity to reduce dependence on the national government, especially in rural areas and less developed urban areas. Regions would also benefit from greater autonomy over the allocation of government transfers. Greater autonomy does not, however, mean freewheeling, unchecked spending. Any reform should also push for a centralized oversight mechanism led by the Contraloría General de la República, which oversees all public financial expenditures. Such decentralization reforms should be accompanied by enhancing transparency in public contracting and an overarching judicial reform.

The overly centralized nature

of the Colombian state creates natural opportunities for graft.

4Mitigating the domestic impact of the Venezuelan migrant/refugee crisis and taking a leadership role on the world stage to push for a return to democracy in Venezuela

The Venezuelan crisis was a hot topic during the presidential election. Local institutions in Colombia will be increasingly strained as the situation in Venezuela deteriorates even further, making it imperative for President-elect Duque to put forward a comprehensive strategy that properly attends to Venezuelan migrants and refugees, while also safeguarding the needs of Colombians. Duque should also adopt a leadership role on the world diplomatic stage to press for a return to democracy in Venezuela.

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Alberto Fujimori
The influx of Venezuelans escaping crisis at home has overwhelmed border towns like Maicao. [Reuters]

Current estimates indicate that over a million people have permanently left Venezuela for Colombia in the last sixteen months, including nearly half a million entering on an irregular status. Of these, more than 100,000 work in the informal sector. Venezuelans comprise between 17 and 23 percent of the population of three border cities in Colombia – Maicao, Villa del Rosario, and Arauca.

Duque will have to build on the laudable efforts undertaken by government authorities over the last few months to deal with the fallout of Venezuela’s crisis. His campaign proposals of granting temporary work permits for migrants and a $300 million humanitarian assistance fund would definitely be steps in the right direction. He will have to navigate the challenges of implementation. His government will have to implement a sector-focused strategy that prioritizes health care (especially epidemiological care), education, and proper urban planning, especially for border cities such as Cúcuta that receive 30,000-40,000 Venezuelan migrants per day.

Colombia should play an even larger regional and global role to exert additional pressure on the Maduro regime. This means greater presence at the Organization of American States (OAS), additional targeted sanctions, and potentially even presenting a case against the Venezuelan government to the International Criminal Court (ICC) – an effort Duque himself led with a group of over 150 Colombian and Chilean senators last July.

With inflows from Venezuela only growing,

Duque will need a comprehensive strategy that attends to the needs of refugees while also safeguarding those of Colombians.

5Continuing and consolidating the process of fiscal adjustment

Most of the above-mentioned issues will require significant investments – with success here tied to the country’s impending fiscal adjustment. The 2014 reduction in oil prices led to a sharp drop in public revenue at a time when government spending had steadily increased.

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Alberto Fujimori
Colombia’s central bank building in Bogotá. [Reuters]

Since Colombia must legally adhere to the so-called fiscal rule – which sets a limit on the structural fiscal deficit to avoid macroeconomic disruptions – a tax reform that builds on the 2016 changes will be inevitable. It should be structural, reducing the tax burden on companies, broadening the tax base for individuals, and using mechanisms such as a dividend tax to further increase tax revenues. Duque should also clamp down on tax evasion as a complement to any structural tax reform.

Additionally, the president-elect should push for reforms that make public spending more efficient, effective, and redistributive. Allocating spending on a program-by-program basis would allow for better impact measurement. In correcting subsidy programs that benefit the wealthy (such as pension subsidies) and focalizing subsidies on those who truly need them, Duque could help make public investment more efficient and progressive. A recent report released by the Public Spending Commission – a group of experts tasked by the government with analyzing the state of public spending – is a rigorous roadmap whose recommendations would help the incoming government achieve its most pressing fiscal issues.

Peace implementation and institutional strengthening

will be costly up front, though with massive return on investment.

Conclusion

The election of Iván Duque comes at a time of great promise for Colombia. But he will have his work cut out for him upon taking office on August 7. Implementation of his priorities will require effective congressional action, collaboration with civil society organizations, and critical investment from the private sector. Building coalitions and seeking compromise to overcome political polarization deepened by the election will be essential. With tremendous opportunities to further catapult Colombia onto the world economic and political stage, this is undoubtedly a critical moment for Colombia to consolidate its achievements and carve out its future path.