Colombia Watch Trip Notes

Following a trip to Bogota, BofA reports that market sentiment has turned bullish due to the momentum of conservative presidential candidate Abelardo de la Espriella. However, persistent inflation risks have led the bank to forecast a 100bp rate hike for June.

Key Takeaways

• 1.The potential presidential victory of Abelardo de la Espriella is driving investor bullishness due to his focus on fiscal consolidation and deregulation.
• 2.BofA has revised its monetary policy outlook to include a 100bp rate hike in June 2026, driven by inflation risks and El Niño.
• 3.Colombia's COLCAP index has rallied 8% on election optimism and remains at a significant valuation discount relative to historical levels.

Table of Contents

• Key takeaways
• Summary of trip: focus on politics, with bullish flavor
• LatAm elections showing trend towards conservatism
• Abelardo's economic plan: fiscal cuts and deregulation
• IMF engagement, deregulation, repeal of AFP decree
• Independent analysts believe larger adjustment is needed
• Risk of inhering a fiscal deficit close to 8% of GDP
• Potential picks for Finance Minister under Cepeda
• Potential picks for Finance Minister under Abelardo
• Restrepo, link with Duque administration and Uribistas
• Cepeda implies continuity in government policies
• Unlikely to spend political capital on reforming BanRep
• Downside risks on investment
• Government policy levers in Cepeda scenario
• Precedents of financial repression to commercial banks
• BanRep will resume hikes, irrespective of election
• Adding a 100bp rate hike in June to our scenario
• Less fiscal dominance in the board
• Economic activity seems to be weakening
• Political transition could reignite Colcap rally in Colombia
• Ecopetrol could become a candidate for MSCI LatAm Standard Index inclusion