Colombia - Banks, crypto companies face political uncertainty ahead of presidential elections
Two outsider, populist candidates want to reform the banking sector in Colombia.
Anti-establishment Rodolfo Hernandez surprised Colombia on 29 May when he passed to the second round of presidential elections alongside Gustavo Petro. Petro, too, is an outsider with a quest to overturn the political elite. But for all the differences between Petro and Hernandez and regardless of the opposing political forces backing them, both say they want to reform the banking sector.
Former M-19 guerrilla Gustavo Petro won 40% of the vote two weeks ago with construction magnate Rodolfo Hernandez taking 28%. Federico Gutierrez, who was thought to be a shoe-in as the conservative bloc’s second round candidate, came in third with 24%. Sergio Fajardo, a mathematician from Medellín who will probably put his votes behind Petro, notched 4%.
For Petro, financial inclusion for under-privileged Colombians and their integration into the formal banking sector is fundamental for solving Colombia’s yawning inequality. If elected, Petro will likely find a way to bring in more competition for micro lending, tackle predatory lending, and push banks to expand credit to under-privileged classes. He might even try to provide low rate financing through a state agency like BancoAgrario, a state-owned rural development bank, to satisfy his base.
Hernandez is even more of a black box. He claims that years of experience in the construction and residential building sector earned him a front row seat for how unfair banks really treat the small guy. He is leveraging this narrative - as well as about a dozen other populist memes - to corral voters.
Peering through the uncertain electoral outcome, one thing is clear: Petro or Hernandez will be president and both want to go hard on the traditional banking sector.
Under the Petro scenario, it seems that the presidency will look for ways to incentivize banks to expand credit and simultaneously try to get banks to drop a series of fees tied to keeping money in savings accounts. If he can’t do this through a reform in congress, he will likely tug on the regulators that sit within his executive authority to make it happen.
Hernandez will need to ally with Fico’s bloc in order to win. If he pulls this off, it is hard to see him bite the hand that fed him and smash Iván Duque’s financial regulatory agency into pieces. The financial regulator, after all, is where crypto policy is being incubated in a tech pilot that marries banks with exchanges. One threat banks and crypto companies will need to watch out for is a political appointee loyal to Hernandez but who misunderstands or who plainly ignores altogether the executive-led crypto policy.
It’s hard to see Petro - who wants to build a Seoul-like knowledge economy - scrapping Duque’s crypto sandbox altogether. Keeping the Bogotá tech sector intact should be good for Petro’s base.
It would be hardly surprising to see Gustavo Petro appoint former congressional representative for the Green Party Mauricio Toro to lead financial policy making. Toro is pro-crypto. The lawmaker’s bill passed in a first debate. But as Toro will step out of law-making, he will be looking for a job and Petro needs a regulator. But if Petro thinks he has a better way of doing things, he will.