Colombia’s first left-wing government has reduced poverty, but has a pile of debt Elections

Bogota, Colombia: Laura Espinel would not have been able to achieve her dream of becoming an artist without the “zero tuition” program established in 2023 by the administration of Gustavo Petro.

The program provides up to 100 percent of tuition fees at public universities in the country and primarily targets youth from middle- and low-income families. Since its inception, according to the government, it has benefited 870,000 students in 64 public institutions.

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“Without education, I would not have been able to study, because when I started school, my finances were very difficult, I did not have money to pay for a semester, even at a public university,” said Espinel. Without the tuition waiver, Laura could pay about $400 a year, and at a private university, it could be $3,000.

The “zero tuition” program is one of many social initiatives promoted by Colombia’s first left-wing government, Gustavo Petro, which is ending after four years.

On May 31, Colombia will elect a new president. The main candidates are two opposing political parties. Ivan Cepeda, a veteran leftist and member of the same party as Petro, wants to continue his many policies, social and economic.

He supports the continuation of the transition to renewable energy by injecting capital into the villages of Colombia and small farmers to become a pillar of the national economy, create more jobs, increase food production, and support the system to change trade so that the goal is to gradually change the capital to the agricultural sector and not additional industries.

At the other end of the spectrum is Abelardo de la Espriella, a “foreign” right-wing lawyer who wants to emulate El Salvador’s President Nayib Bukele, especially in his controversial security policies, including the construction of large prisons. His main economic strategy focuses on reducing government spending and lowering taxes on large corporations.

Both are facing a major problem: a debt equal to 58.5 percent of GDP that comes with high interest payments and prevents the government from spending money.

Human progress

Peter spent much of his time in office trying to get Congress to accept many of his proposed proposals: peace talks with illegal militias; pension reforms to increase coverage and strengthen pension funds; is an economic law that sought to make the wealthy pay more taxes by imposing a wealth tax.

Since there is no change in the tax rate or the change in the personal wealth tax has not been established, the government has implemented some aspects of the tax reform, including a temporary wealth tax, for individuals and businesses.

But his biggest success came from the labor reform approved last June, which raised the minimum wage by 23 percent, much higher than the usual increase of 5 percent to 10 percent. The law itself states that overtime must be properly paid and starts at 7pm, two hours earlier than before. In Colombia, the standard working day is eight hours.

Javier Beltran is a young baker who owns a shop in the central district of Bogota. He has only one employee and pays him well. The increase in the minimum wage surprised him.

“The figures did not involve me, but I understand that it was the right thing to do,” he told Al Jazeera.

Beltran wanted to cut costs in order to pay what the law requires. Some nearby business owners have laid off their staff.

With the approval of labor reforms, unemployment is expected to rise as many employers have not been able to adapt. However, unemployment is falling in Colombia: it reached 10.9 percent in January – the lowest rate in 25 years – and is down from 11.2 percent in 2022 when Petro took office.

But some economists say the increase in workers’ purchasing power due to rising wages boosts the economy, especially since wage growth is outpacing inflation.

Some attribute this decrease in unemployment to the increase in unemployment and the increase in public administration, which grew from 48,000 people in 2022 to 64,000 in 2024.

Mauricio Salazar, an economist at the Fiscal Observatory at the University of Javeriana in Colombia, adds that this is part of the regional culture.

“The number of unemployment in Latin America is decreasing, but the country has not seen a significant decrease compared to other countries in the region, and this is related to the recovery of the epidemic (COVID-19),” where there was a high risk of people being displaced, Salazar said.

‘Reliance on increased debt’

All this has helped the people to spend more money, which is very difficult for the next government.

To pay for his proposal, Petro aimed to raise 26 trillion pesos ($2.5bn) through a number of measures, including a budget plan that would, among other things, raise taxes on the wealthy. But all were rejected by the Congress.

Salazar says the financial situation that Petro left behind is cause for concern.

“This administration has increased the debt by 400 trillion pesos ($109bn). So the important question is that, beyond looking at the agreement, what is the way to increase the economy and attract more money? Because whatever it was, the data shows that it does not work. The government has been relying on additional debt,” he said.

Some economists blame the debt that has grown on the pandemic as governments around the world have used bailout funds to pay for emergencies, and for long periods of time when businesses shut down overnight.

Some say the Petro took on too much debt to begin with – it stood at around 57 percent of GDP under his predecessor, Ivan Duque.

He criticizes Congress for failing to pass an additional tax that would have helped fund the state by taxing gasoline, Internet gambling and church-related businesses.

“Petro wanted to promote an economic model in which the return of the share of workers to the national economy shows that an unequal economy is not doing well.” “Colombians want more money, but the country’s authorities – especially in the oil and mining sectors – were very effective in blocking the tax pledge in Congress,” said Simon Gomez, an economist at King’s College London.

One of Petro’s main campaigns was to promote an energy transition, replacing fossil fuels with renewable energy. He paused the signing of new contracts for coal, oil and gas exploration and distributed land to small farmers—in some cases, land bought from large landowners, and in others, land that had been government-owned and expropriated during the height of the civil war in the early 2000s.

But hydrocarbons represent more than 40 percent of Colombia’s total sales and cannot be easily replaced. The next president will have to find new ways to raise money or revive these economic activities.

The far-right candidate, de la Espriella, has already announced that, if elected, he will approve development such as fracking to increase oil and gas reserves.

Cepeda’s company, however, focuses on non-conventional renewable energy, such as solar and wind, as well as promoting the rural economy, providing funding with increased funding from Ecopetrol, the state-owned power company and one of the largest oil companies in the region.

Tit-for-tat tariffs

Since the peace agreement signed by the government with the Revolutionary Armed Forces of Colombia (FARC) in 2016, the country has enjoyed peace for several years, but the conflict has slowly returned and new illegal groups have emerged, creating a climate of violence, especially in rural areas and small villages.

In January, Ecuador cited security concerns in imposing a 30 percent tariff on imports from its northern neighbor, Colombia. Ecuadorian President Daniel Noboa said Petro was not cooperating on security issues along the 586km border they share. The measure was raised to 100 percent.

In a tit-for-tat response, Colombia responded with the same level of tariffs from Ecuador.

Ecuador is the sixth largest country in Colombia that goes to Colombia, while Colombia is like Ecuador’s second or third in terms of trade.

Since February, when the prices started, it is estimated that around 5,000 jobs have been lost across the border with at least 2,700 companies affected in Colombia and another 2,000 in Ecuador.

Businesses in the automotive sector in Colombia, which export to Ecuador, have been the most affected. Ecuador’s seafood industry, one of its main exports to Colombia, has also been affected.

At the beginning of May, the Andean Community (CAN) – a regional integration system – intervened and declared the measures illegal. The agency has set a 10-day deadline, which is due to end on May 21, for the tariffs to be removed. Ecuador refused.

Guillaume Long, the former Ecuadorian foreign minister, believes that Noboa’s decision was sustainable and politically motivated, and has had a significant impact on the people of the two countries.

“Noboa said he made a decision because Petro did not agree with the border security. But this does not mean that he will pay the tax. In 2015-2016, the last time Ecuador imposed a tax, it was because Colombia reduced its income. In other words, everything is happening randomly,” he said.

The diplomatic spat is deepening business mistrust in Colombia, which has been on the wane due to rising violence and will add to the incoming president’s list of challenges.

On Sunday, Laura, Javier, and their only employee, Johana, will vote for Cepeda. But some small shop owners near their shop visited by Al Jazeera will vote for anyone who opposes Petro.