The economic uncertainty brought by the elections in the country

Four months before the legislative elections and six before the presidential elections, the question of who will be the successor to the current head of state, Iván Duque Márquez, is already
this generating uncertainty about how it could affect the direction of the economy and the investments that land in the country.

This uncertain panorama was even warned by the rating firm Fitch Ratings, when it recently ensured that “thePolitical tension can hamper growth”. However, the government is optimistic about the future of the national economy,
by highlighting that there will not be much change in the behavior that has been recorded in the reactivation.

But given the efforts to show that development will not go into a tailspin due to the presidential elections, the reality is that doubts could end up affecting behaviors such as direct and portfolio investment, or the same exchange rate in the currency of the peso against the dollar.

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Precisely, in relation to this last indicator, analysts point out that the price of the US currency could continue around $4,000 in the first quarter of next year as a result of the mistrust of the electoral process in Colombia.

For the manager of economic research at Acciones & Valores, Wilson Tovar, the value of the dollar would not be above that level. That yes, the economist remembers, for example, that in the 2021 that currency registered an average volatility of $500 while he believes that it would be quoted at an average of $3,750 in 2022.

WHAT’S COMING

Regarding the behavior of the economy in the short and medium term, Tovar underlines that growth in this matter for the country could reach 9.2% by the end of this year and is projected at 4.7% by 2022.

“That will be the year in which we overcome the economic effects of the pandemic: the effects of the new normality will be capitalized. We will have more digital companies and consumers. And a new way of looking at the economy: this is how this fourth industrial revolution should be baptizedTovar says. And the sectors called for this reactivation, also according to the expert, are mining, construction and commerce.

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To the above is added that results such as those recently published by the National Administrative Department of Statistics (Dane), in which it reveals that in the third quarter of this year the Colombian economy rregistered a growth of 13.2%, allow to increase the optimism with a view to what will happen in 2022 in terms of reactivation for the country.

Analysts agree on this who affirm that throughout 2021 there has been a general recovery in all sectors and they estimate that the phenomenon may
extend over the next year, although in a more moderate way due to the elections.

“It is noteworthy that the activities of the economy that were most affected by the pandemic in 2020 – such as commerce (which includes accommodation and restaurants), industry and entertainment – ​​have been the ones that have shown some of the biggest rebounds during the first months of the year, with growth close to 22%, 18% and 35%, respectively. These industries will be able to maintain this positive dynamic in 2022 to the extent that Colombia continues to make progress in vaccination and in overcoming the pandemic to avoid new closures of the economy that could reverse the recovery.”, explains Leonardo Mila, strategy manager at Porvenir.

FOREIGN INVESTMENT

Regarding what awaits Colombia In terms of foreign direct investment (FDI), Mila believes that this is a country that remains attractive to investors due to its economic dynamism, its institutional framework and its demographics.

Additionally, in the regional context, the expert maintains that the nation stands out as one of the most stable socio-political despite the great challenges that the pandemic has posed on this front.

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“Although global financial conditions may tighten a bit next year, with the main central banks continuing to gradually withdraw the large monetary stimuli implemented during the pandemic, our country will continue
offering investment opportunities both for capital investors in the different sectors of the real economy, as well as for portfolio investors seeking attractive returns with a moderate level of risk”, stresses the Porvenir Strategy manager.

There is no doubt that electoral uncertainty is often accompanied by a caution regarding investment, so that capital agents would postpone their disbursement decisions until the results of the legislative and presidential elections are known. “Given this panorama, we will have a first semester with greater indecision, followed by a second that will be more dynamic and in which it will be possible to
consolidate the normalization of economic growth”, estimates Mila.

STRONG INSTITUTIONALITY

The panorama of economic uncertainty derived from the electoral elections next year contrasts with the country’s institutionality, which, for the National Government, is robust and armored.

“Colombia’s institutions have historically been strong enough and have always been built democratically and will continue to do so. This ensures the appropriate environment for foreign investment”, assures José Manuel Restrepo,
Minister of Finance.

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The official specifies that the revival coming at a good pace, since the nation expects FDI income to the country to be US$11,175 million in 2021, which represents an annual growth of 46.2%. And by 2022, it is projected that direct investment flows will continue to recover and will reach US$12,953 million, growing 15.9% compared to
projected for 2021.

In the same sense, Flavia Santoro, president of ProColombia, notes that so far
of the year, 112 new projects have arrived in the country, whose start-up and development will represent investments for US$6,918 million in the medium termoy the generation of more than 90,400 jobs.

“This is already 86% of the goal we have for this year, and it is an indicator that the arrival of foreign capital maintains its pace and confidence in the country.”, maintains the official.

In little more than six months, the national economic outlook will be clear, and there will be a more specific road map of where Colombia should go with a
new helmsman in command.

ALFONSO LOPEZ