Fitch: Colombia election results should reinforce macro policy framework

Fitch said the outcome of last Sunday's congressional elections in Colombia bodes well for the country's macroeconomic and fiscal policy framework.

No party gained an overall majority although center and center-right parties continue to dominate.

"The electoral results are likely to contribute to a continuation of Colombia's track record of effective economic policy, including gradual fiscal consolidation over the medium term," the rating agency said in a statement.

In the elections, the Liberal party led the lower house race, securing 35 of the 166 seats. The Democratic Center party secured the second-biggest number of seats, 32.

In the senate, the Democratic Center party secured 19 seats of the 107 seats up for grabs, followed by the Radical Change party with 16.

The FARC, participating in its first elections after demobilizing and transforming into a political party, received just 0.22% of lower house votes and 0.35% of those in the senate. Under terms of the peace deal, the party is guaranteed five seats in both houses.

The group last week withdrew from the presidential race, citing the ill-health of candidate Rodrigo Londoño and attacks by right-wing groups.

Presidential primaries were held at the same time, with left-leaning aspirant Gustavo Petro and conservative hopeful Iván Duque confirming their candidacy for May's presidential vote.

Petro, a former Bogotá mayor and one-time Marxist guerrilla beat Carlos Caicedo for the leftist coalition nomination by receiving 2.8mn votes.

Duque, handpicked by former president Álvaro Uribe to represent the Democratic Center party, got more than 4mn votes for the right-wing primary, defeating challengers Marta Lucía Ramírez and Alejandro Ordóñez.

"Fitch believes that a sharp divergence from the existing macroeconomic policy framework is unlikely from any of the major candidates," the agency said.

"The composition of the new centre-right dominated congress should help to ease policymaking should Duque win the presidency, while acting as a policymaking constraint if Petro wins. The checks and balances built into Colombia's political system - notably, the public consensus that supports macro stability and facilitated the 2016 tax reform, the fiscal rule and framework, the congressional powers, and the independent central bank - act as key constraints to major economic policy changes."

Last week Tómas Venezian, a partner at LatAm-focused asset manager Compass Group, said he was not very concerned about political risk in Colombia.

Colombia's economy - battered by the oil plunge in the past few years - is slowly strengthening.

"Fitch expects economic growth to accelerate in 2018 and 2019 to 2.8% and 3.5%, respectively. While this will mark an improvement, economic activity will remain moderate relative to the greater than 4% growth seen prior to the oil shock," the agency said.