. Colombia’s GINI coefficient, a key recognized measure of socioeconomic inequality where a lower number is better, soared to 54.2 in 2020 from a decade low of 49.7 in 2017.
To combat an untenable fiscal deficit while boosting government coffers to fund spending for ambitious social programs the newly installed Petro administration introduced a tax reform bill designed to boost fiscal income from taxation. The hiking taxes for Colombians earning over $10 million pesos or approximately $2,400 per month and placing a levy on heavily process foods as well as beverages.
These developments have triggered considerable market jitters, particularly for participants in Colombia’s petroleum industry. Not only is crude oil the crisis-riven country’s single largest export but the oil industry is struggling to return to pre-pandemic production volumes due to a range of significant headwinds.
There is, however, still considerable uncertainty as to whether this signals the end of Colombia’s hydrocarbon sector. The urgency with which government revenue must increase to head off a fiscal crisis and fund crucial poverty alleviation programs means the 10% export tax on crude oil will become a critical source of additional income. That may lead to a rethink at the highest levels of government as to how Colombia’s hydrocarbon and other natural resources can be better managed.