(Bloomberg) -- Gustavo Petro took power in 2022 pledging to improve the lives of tens of millions of poor Colombians. Two years later, plagued by corruption scandals, constant cabinet changes and failed reforms, he faced down the biggest social crisis of his presidency this week.
After failing to advance a radical agenda for which there was little support in Congress and which further strained the nation’s finances, it was his attempt to phase out costly diesel subsidies that triggered crippling protests.
Truckers — responsible for transporting most food and other essentials through the mountainous Andean country — blocked entry roads to Bogotá and other cities all week until a deal was reached Friday morning. Public schools and transit were shut, affecting the commutes and jobs of thousands. Food supplies fell at least 23%. State-owned Ecopetrol SA closed oil fields. Jet fuel at airports was rationed. And hospitals were at risk of running out of medicine.
Petro didn’t acknowledge any of it during a speech Wednesday, angering many Colombians who say he’s out of touch. “That proves he doesn’t care,” said Maria José Patiño, who owns a business that sells organic meat. “Everything is paralyzed.”
Since Monday, she had cattle stuck on the road, about 120 kilometers (74 miles) from Bogotá. Her husband Juan Pablo, who raises chickens, wondered if he would be able to deliver the some 3,000 eggs he had promised clients. In Chia, the town where they live, Patiño said local butcher shops had run out of meat and refrigerators were practically empty.
To end the protest, the government agreed to a gradual 800 peso (about $0.20) increase to diesel prices this year — less than half of the nearly 2,000 pesos it had announced on Aug. 31, touching off unrest. While Petro hailed the resolution of the dispute as quick and conducted “in the best way possible,” it still leaves his administration with substantial hole in its budget.
Having already increased gasoline prices and with Friday’s agreement on a slower rise for diesel, Colombia will end this year owing Ecopetrol around 12 trillion pesos for fuel subsidies, according to Finance Minister Ricardo Bonilla. Next year the gap will fall to 5 or 6 trillion pesos.
“Colombia’s public finances have been for a while now very stretched, very forced,” Bonilla told Blu Radio after the agreement was announced. “What is most important now is that we reached a deal and the country can recover normalcy.”
For Petro, Colombia’s first leftist president, the crisis will also take a political toll. His disapproval was already at a high of 66% before the roadblocks, according to an August poll by Invamer.
“Now the government has more fights ahead,” said Sergio Guzmán, who heads Colombia Risk Analysis. “Other groups have realized that when they strike, the government ends up giving in and this ends up in an incentive for them to make more protests in the future.”
With two years left in his term, Petro has little to show so far. He has no majorities in Congress and courts will probably strike down some of his government’s marquee initiatives. His waning popularity is only hurting his party’s chances in the next presidential election.
It’s also a role reversal for Petro, a former guerrilla who in 2021 was a vocal supporter of similar protests when President Iván Duque’s government tried to raise taxes as Colombia was emerging from the pandemic.
In the current crisis, the national government allowed Bogotá Mayor Carlos Fernando Galán to deploy a mobile anti-disturbance squad to force truckers to clear the way in critical areas of the city on Thursday. Such tactics were often rejected by Petro when he was an opposition leader.
During his presidency, Petro has pushed out long-serving officials in favor of loyalists, stripping his government of institutional knowledge and capacity. So while the growing tension is of his own making, this latest crisis was worse, according to Jorge Restrepo, director of Bogotá-based political research group CERAC.
“We have had four consecutive days of multiple nationwide blockades, and a very low provision of the essential public service of road transport, both freight and passengers,” Restrepo said. “The impact is severe.”
Magda Pais, a housekeeper, walked for almost four hours on Wednesday to reach her home in the northern outskirts of Bogotá after the capital’s bus transit system collapsed. She stayed home on Thursday. Her husband Juan Camilo, who operates heavy machinery, was able to get to his job but was turned away after the majority of his company’s workers couldn’t make it.
“This is a s—-show,” said Juan Carlos Echeverry a former Colombian finance minister and former chief executive at Ecopetrol.
The state oil company announced Thursday that it had begun shutting operations at oil production fields in Colombia due to the roadblocks. It has also faced difficulties after more than a dozen attacks on its oil pipelines in the last few days after a ceasefire with leftist rebels broke down.
This only adds to the frustration from oil companies and investors who have watched as Petro has tried to squelch the nation’s fossil-fuel production, refusing to grant new licenses to explore even as Colombia faces a natural gas shortfall starting next year.
And with tensions compounding, the finance ministry plans to present a tax bill to help cover the $2.9 billion funding gap in its 2025 budget. Lower-than-expected fiscal revenue has strained the government’s accounts.
Some business owners and opposition lawmakers have rejected the plan and demanded the government cut spending instead. But Petro’s administration says the new revenue is needed to finance its social programs. The government forecasts the economy will expand 1.8% to 2% this year, while it plans to post a fiscal deficit of 5.6% of total output, the widest since the pandemic.
Which is why to Guzmán, the government’s portrayal of the deal with truckers as a win rings hollow. “The government is declaring a victory,” the political risk analyst said. “But it is a Pyrrhic victory because it is left with the same deficit problem that it had been trying to solve.”
--With assistance from Matthew Bristow.
(Recasts throughout to reflect negotiated end to dispute over diesel price hike.)
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