Colombian Peso, Stocks Drop After Tax Plan's Withdrawal
- Colombia's peso, public debt, and stocks depreciated on Monday after President Ivan Duque withdrew a tax reform proposal seen as important for the country's fiscal stability, sparking market uncertainty and comment from rating agency Moody's.
- Duque withdrew the proposal on Sunday after staunch opposition from lawmakers and deadly street protests, but he said tax reform is still necessary and that a new proposal will be made with consensus among business leaders, political parties, and civil society.
- The withdrawn proposal, originally intended to raise more than $6 billion in revenue, would have increased taxes paid by individuals and businesses, expanded sales taxes, and eliminated exemptions and deductions.
- The Colombian currency fell 1.4% to a six-month low of 3,804.95 pesos per dollar. Since the tax proposal was sent to Congress on April 15, the peso has depreciated 5.3%. Considering the withdrawal of the proposal, the cessation of the social unrest will likely influence some positive movement in the currency.
- However, the government will have to find alternative solutions to provide funding to finance its operations and pay down its debt.
(Source: Reuters & NCBCM Research