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Colombia Election Puts Economic Model, US Relations at Stake

·3 min read

(Bloomberg) -- Colombians voted Sunday in a presidential election to choose between an ex-guerrilla who wants to transform their business-friendly economic model, and a construction magnate who is under investigation for corruption.

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Leftist Gustavo Petro, 62, a former mayor of Bogota, wants to raise taxes on the rich, halt oil exploration and protect local industry and agriculture with tariffs.

Rodolfo Hernandez, 77, was until recently little known outside the provincial city of which he was mayor, but attracted millions of supporters with his attacks on crooked and wasteful politicians, often using social media. His economic policy program is thin on detail.

Polls closed at 4 p.m., with first results expected early Sunday evening. Earlier in the day, Hernandez cast his vote in the city of Bucaramanga, in eastern Colombia, while Petro first visited one of the country’s best-known Catholic shrines in Bogota to pray.

The fact that two anti-establishment candidates made it to the runoff despite one of the fastest rates of economic growth in the Americas this year is a sign that Colombians are demanding a shift away from the traditional style of politician who has led the country for decades. The outcome is also likely to upend the nation’s close relationship with the US.

“Things will not be the same again,” said Mauricio Cardenas, a former Colombian finance minister who is now a regional adviser for Goldman Sachs Group Inc. “Here we have two outsiders, people who are not part of the system.” Regardless of the winner, he added, this election will mark “a turning point.”

Investors clearly prefer Hernandez, and the peso rallied after he made the second round, although it subsequently gave up those gains amid uncertainty over his program for government. Petro is mistrusted by many money managers, partly because his plan to phase out oil and coal would deprive Colombia of about half of its export revenue.

The economy is set to grow 5.8% this year, the fastest pace among major Latin American economies, according to the International Monetary Fund.

Markets won’t open fully until Tuesday due to holidays in Colombia and the US on Monday.

Petro’s support is concentrated among younger Colombians, and the result may hinge on how many of them turned out to vote.

Petro posted on Twitter photos and videos of ballots that had allegedly been spoiled before the vote and said, “Today we need to block any attempt at fraud with massive turnout.”

Hernandez criticized him for creating fears of fraud based on gossip.

US Relations

Colombia has been one of Washington’s closest allies for decades, but this election may change that.

Whoever wins, the vote is likely to destroy the bipartisan consensus under which both Democrats and Republicans backed military cooperation and joint efforts to fight illicit drug trafficking, said Sergio Guzman, director of Colombia Risk Analysis.

US Republicans will be reluctant to approve funding for Colombia if Petro is in office, while Hernandez’s policies and some offensive comments he has made about women may make Democrats less likely to engage with him, he said.

“Come what may, that relationship is going to be frayed,” Guzman said.

(Updates with polls closing in 4th paragraph.)

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