While Colombia s long-term political outlook is set to remain relatively stable compared with its neighbours, we identify several massive politi- cal challenges for the government over the next decade and highlight three scenarios for change. Colombia s long-term political outlook is set to remain stable over the next decade. ...Inequality, drug trafficking, foreign policy, left-wing insurgents and paramilitary links to politics are the main long-term political risks facing the country. Key challenges Tackling Inequality: Colombia has a vast income disparity and, though it has moderated somewhat in recent years, the country remains one of the most unequal in Latin America, with a Gini coefficient of --.- in ----, according to World Bank data. As a result, the country falls well outside our safety threshold of --.-. ...Despite the current administration s plan to post a balanced budget in the medium term, social development remains a key government priority, making up one of the largest portions of fiscal expenditures. However, income inequality in Colombia is very much a symptom of the unequal distribution of land, with - Business Monitor International Ltd www political outlook run-off too close to call first-round Presidential election results, of Vote Source: CNE, BMI inequality persists
...- Business Monitor International Ltd www colombia Q- ---- core Views We believe that Colombia s economy will expand at robust growth rates in the coming years, characterised by improved macroeconomic conditions and an increasingly friendly business environment. Stronger private consumption will drive the majority of growth, al- though gross fixed capital formation (GFCF) will play an increasingly important role over the coming quarters. the infrastructure, mining and hydrocarbons sectors are particularly well positioned for growth. ...Key risks to outlook upside risks: Elevated foreign investment inflows into the country following Colombia s upgrade to `investment grade by all three major ratings agencies could drive growth even faster than expected. In addition, a successful agreement during the ongoing peace nego- tiations between the government and the country s main left-wing insurgent group, the Fuerzas Armadas Revolucionarias de Colombia (Farc), would likely result in even greater foreign investment as risk perception improves. Downside risks: at the time of writing, the June -- second round presidential election has not taken place. ...under such a scenario, foreign investment into the hydrocarbons sector could fall below our expectations. - Business Monitor International Ltd www executive summary
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