Markets bet big on De la Espriella, Colombia's next president. Economists are not so sure

Financial markets cheered Abelardo de la Espriella's victory in Colombia's June 21 presidential runoff. The peso surged, bonds rallied and equities climbed on hopes of business-friendly reform.

But two Colombian economists interviewed by IntelliNews caution that the structural costs of “El Tigre’s” programme — spanning deep state cuts, fossil-fuel expansion, labour deregulation, a sharp geopolitical pivot toward Washington and a hardline security agenda — could far outweigh the initial euphoria, with consequences felt most acutely in the country's poorest regions, communities and ecosystems.

Right-wing populist De la Espriella beat leftist senator Iván Cepeda by a margin of barely 250,000 votes — one of the narrowest in Colombian history — and is set to take office on August 7 presiding over a deeply polarised country that now joins a wave of like-minded governments across the region. That fragile mandate, economists warn, will collide directly with an economic and security programme that assumes far more room for manoeuvre than the numbers suggest he has.

The fiscal paradox of tax cuts that may not stimulate

Laura Andrea Cristancho Giraldo, an economist and tenured professor at the Faculty of Business, Management and Sustainability at Politécnico Grancolombiano in Bogotá, said market optimism rests on conditions that have yet to be met. "Markets typically react favourably to corporate tax cut proposals due to their potential to stimulate foreign direct investment," she said. "However, this effect will depend on the fiscal credibility of the incoming administration."

If lower tax revenues are not offset by structural adjustments to public spending, she warned, concerns over the fiscal deficit, public debt and the country's credit rating could mount. Foreign direct investment, she added, responds primarily to legal, regulatory and macroeconomic stability — not to tax cuts alone.

Felipe Abondano, a Colombian journalist and economic analyst, was more categorical: tax cuts as a stimulus tool have "never worked anywhere else in the world." He pointed out that De la Espriella's own campaign positions shifted repeatedly, leaving genuine uncertainty over which proposals will actually be implemented in office.

The proposed 40% reduction in the state apparatus carries the most concrete risks, Abondano argued. The merger or closure of institutions such as the National Savings Fund would directly curtail Colombians' access to housing finance, while planned ministry unifications would slash investment in culture and sport — sectors with outsized economic multiplier effects in many communities. "In many parts of Colombia the only official employer is the state, and the only people with purchasing power for many things," he said. "It will have a differential and very deep impact, especially in the regions."

Yet the scale of the fiscal challenge awaiting the new government is not in dispute. Outgoing President Gustavo Petro decreed a 24% minimum wage rise in January — more than even unions had demanded — aggravating a budget deficit that already exceeded 6% of GDP last year, according to Barron's. Nicolas Jaquier, an emerging-market fixed income portfolio manager at Ninety One, told the publication that Colombia needs "a 4-5% of GDP fiscal adjustment.” Meanwhile, some 90% of government spending goes to politically untouchable areas such as the military and pensions, Paul Dmitriev of Global X ETFs told Barron's, while interest costs already absorb around a fifth of state revenue.

Locally, the powerful National Association of Financial Institutions (Anif) has urged the incoming government to defuse what it calls a "fiscal bomb" by cutting $7.8bn in public expenditure and advancing a $3.5bn tax reform, Blu Radio reported. Anif's proposals — including reducing state payrolls, raising diesel prices and dismantling existing tax exemptions — sit in direct tension with De la Espriella's promise of corporate tax cuts, suggesting the new administration's fiscal room may be far narrower than markets currently anticipate.

Energy: short-term revenues, long-term ecological and economic costs

On fracking and hydrocarbon expansion, two of De La Espriella’s signature proposals, the experts who spoke to IntelliNews converged on the asymmetry between near-term gains and longer-term risk. Cristancho Giraldo acknowledged the policy "could increase fiscal revenues and exports in the short term," but warned of "the risk of deepening the existing dependency on fossil sectors within a global context of energy transition." Colombia's páramo ecosystems, the country's critically important high-altitude wetlands, could face heightened environmental pressure, she said, "affecting Colombia's water security and generating future economic costs."

Abondano questioned the economic rationale more fundamentally. Colombia, he noted, is not a country with strong fracking potential, and the real driver of such projects is often financial rather than productive: "What lies behind fracking is the selling of oil project portfolios to multinationals, which doesn't necessarily translate into higher national production." The environmental toll — depleted water sources, devastated fragile ecosystems and pressure on already-endangered species — comes with no guaranteed fiscal return, he argued.

He also pointed to a structural failure in how oil revenues reach communities. "Oil royalties supposedly reach communities via transfers, but that money never actually arrives," he said, citing the Pacific Rubiales precedent as the definitive cautionary case: "The zones where hydrocarbon exploitation occurs don't necessarily see an improvement in quality of life — what you get instead is a speculative movement of money that produces more crime and more prostitution."

The energy sector is indeed where De la Espriella's incoming administration intends to move fastest and furthest. Petro, an advocate of climate mitigation efforts, had blocked new drilling permits, keeping Colombian oil output below 750,000 barrels a day; pro-investment policies and unleashed fracking could lift that above one million barrels, Dmitriev told Barron's. According to S&P Global, much of this agenda can be advanced by executive action alone, since the exploration freeze was a matter of executive policy rather than law. "He can replace [state oil company] Ecopetrol's leadership and redirect its strategy back to hydrocarbons, since the state owns about 88%," said Dorian Kantor, a political science professor at Freie Universität Berlin and director of Kantor Consulting in Bogotá, who added that the incoming government can also fast-track permits and prioritise gas import terminals.

Yet S&P Global also underscores limits to the new administration's reach that echo Abondano's scepticism. Kantor noted that fracking itself, along with environmental licensing and prior consultation requirements, remains "blocked by the constitution and the courts, and thus beyond his reach entirely" — protections rooted partly in ILO Convention 169. In La Guajira, where large wind developments have stalled for years, independent consultant Oscar Alberto Mariño Estupinán told S&P Global that "the main bottlenecks are environmental licensing and prior consultation," with one project able to spend over two and a half years in consultation procedures and still be only halfway through. Kantor argued that transmission and financing constraints compound the problem: "The blackout risk is mostly a transmission-and-finance problem dressed up as a community problem. This same mechanism blocks both the La Guajira wind buildout and his own fracking plans", what he called "the real structural battle" of De la Espriella's energy agenda.

Labour reform: the pension trap and the Argentina warning

On proposed hourly contracts and labour flexibilisation, the two analysts surveyed by IntelliNews offered complementary but urgent warnings. Cristancho Giraldo acknowledged that "a well-designed flexibilisation strategy can facilitate youth hiring," but cautioned that if labour protections are reduced without accompanying structural reform, "this could increase job precarity and instability within formal employment," while simultaneously pressuring the sustainability and coverage of healthcare and pension systems.

Abondano singled out a more specific and immediate danger: the hourly-contract model championed by De la Espriella's vice-president-elect and running mate, José Manuel Restrepo, since his time as minister and as a professor at Universidad del Rosario, would make formal pension accumulation virtually impossible. "Very rarely does anyone manage to accumulate a pension by contributing on an hourly basis," he said. The model would affect not only gig-economy workers but also the large community of technicians who provide services to companies, all of whom could now be offered hourly contracts rather than formal employment.

Restrepo, a former trade and finance minister from 2018 to 2022, is expected to take de facto control of economic policy under De la Espriella, who talked little about economics on the campaign trail, focusing instead on security issues and his opposition to Petro's flagship "Total Peace" policy, which many say has failed to curtail guerrilla violence and drug trafficking.

The direction of pension policy also reverses the outgoing government's approach: where Petro sought to re-centralise pension funds, De la Espriella intends to favour private pension funds once again — a shift with long-term implications for retirement security across the workforce. The parallel with Argentina, where De la Espriella has openly cited President Javier Milei as a political muse, is stark, Abondano said: 'There, 26 companies close per day' — a warning that similar austerity dynamics risk reversing the formal employment gains recorded under Petro.

The proposed agenda also targets women's reproductive rights directly, Abondano added, with the incoming administration signalling a review of abortion rights, a rollback he said will disproportionately affect low-income women with the least access to private healthcare alternatives.

The China conundrum

Both analysts flagged a fundamental contradiction at the heart of De la Espriella's foreign policy. Cristancho Giraldo called for "a strategy of commercial and diplomatic diversification" to preserve Colombia's international competitiveness without abandoning existing economic ties with China, "an increasingly relevant trading partner" whose weight in Colombia's trade architecture continues to grow.

Abondano was blunter about the depth of the dependency now being built into Bogotá's foreign policy, which he said foreshadows a return to the pre-Petro era of close alignment with Washington. De la Espriella's government "owes a great deal to Donald Trump and will be subordinate to what is needed from that relationship," he said, predicting that Colombia will distance itself from the BRICS grouping (Colombia is a member of BRICS’ bank, the New Development Bank) and potentially withdraw from Beijing’s Belt and Road Initiative in favour of attracting US investment exclusively. But the practical barriers are formidable: China is building the Bogotá Metro and accounts for a dominant and growing share of Colombia's imports. "It is very difficult for that to change despite what they want," Abondano said.

That newfound alignment with Washington was already on full display the night of the result. Trump, who had endorsed De la Espriella repeatedly during the campaign, promptly placed a congratulatory call to the president-elect, while US Secretary of State Marco Rubio wrote on social media that the Trump administration "looks forward to working closely with your incoming administration to advance regional security co-operation, end illegal immigration to the United States, and strengthen our economic ties.”

Still, the geopolitical bet on Washington carries a significant political risk of its own, Abondano warned: Trump's executive leverage could be severely curtailed if Republicans lose control of Congress in November's US midterm elections, leaving Colombia diplomatically exposed without the Chinese relationships it will, by then, have actively dismantled.

Security: the ghost of false positives and the dismantling of accountability

On the maximalist security agenda floated by De la Espriella, Cristancho Giraldo offered a measured but pointed warning. "Stricter security policies can yield visible results in the short term, but their effectiveness depends on their articulation with social and territorial policies," she said. "An approach excessively focused on coercion could generate tensions with the peace process and increase social polarisation, particularly among youth and social movements."

Abondano identified two deeper structural dangers. The first concerns the mega-prison model itself: De la Espriella, inspired by the policies of El Salvadoran President Nayib Bukele, has proposed privately operated facilities, meaning the government will not fund construction but will ultimately pay for their operation — a model with a documented record of failure in the United States, where it creates structural incentives for judges to keep prisons full in order to sustain the business model.

The second, and more alarming, danger concerns accountability. The proposed 90-day target for operational results from the security forces precisely replicates the institutional pressure that produced Colombia's "false positives" scandal, in which military units killed civilians and dressed them as combatants to inflate body counts. "Under those pressures, Colombia arrived at the false positives," Abondano said bluntly.

More troubling still, he added, is the proposal to withdraw Colombia from the International Criminal Court and the United Nations human rights framework. "These were often the only controls the Colombian state had, and the only environments where state victims could denounce abuses," he said. Without the Inter-American Court of Human Rights, he argued, the full depth of the false positives cases would never have come to light — nor would the truth about events in Las Combreras and Ituango. Colombia has been condemned multiple times at the international level for human rights violations against indigenous and minority communities, he noted.

The deeper structural problem, both analysts agree, is that Colombia's insecurity – fuelled by a long and troubled history of paramilitary groups linked to cocaine trafficking – is rooted in inequality and lack of opportunity, not in insufficient punishment. "What young people needed was free public education and real job options, and those are precisely what will now be reduced," Abondano said. A security model built on coercion rather than opportunity, he argued, does not address the root cause. It simply makes it more expensive and more dangerous.

A narrow mandate, a wide agenda

De la Espriella's one-percentage-point margin of victory could very well complicate his ability to manage a fragmented Congress, where his fledgling Defenders of the Homeland party holds only a handful of seats — five in the Senate, while the leftist Pacto Historico, led by runner-up Cepeda, controls 39 of the 103 seats in the lower house. "A win by 5% or more would have been really positive," Paul Dmitriev of Global X ETFs told Barron's. Much of the energy and security agenda can proceed by decree; the tax reform, royalty incentives and any rewriting of the prior-consultation framework cannot.

What unites the economists' assessments is an abiding sense that the gap between market enthusiasm and economic reality has yet to be tested. As Cristancho Giraldo put it, foreign investment will ultimately follow stability, not slogans. And as Abondano's analysis suggests, several of the new government's central promises, from fracking revenues to a harsh security crackdown, may deliver far less than advertised, at a cost borne disproportionately by Colombians least able to absorb it.