Colombian constitutional lawyer Mauricio Gaona’s book launch in Medellín—*“Al que hay que cambiar es al presidente, no a la Constitución”* (The one who needs changing is the president, not the Constitution)—marks a high-stakes political and economic pivot. Gaona, a former advisor to President Gustavo Petro’s administration, is now publicly framing systemic reform as a failure of leadership, not constitutional design. His argument, backed by a 2026 economic report, targets Petro’s fiscal policies, which have widened Colombia’s budget deficit to 7.1% of GDP (vs. 5.8% in 2025) and triggered a 12.5% depreciation of the Colombian peso (COP) against the USD since January. The book’s release coincides with Petro’s approval ratings hitting 32%—a 15-point drop since his 2022 election—raising risks of policy gridlock ahead of Colombia’s 2026 midterms.
The Bottom Line
- Fiscal credibility gap: Gaona’s critique aligns with Moody’s downgrade of Colombia’s sovereign debt to Baa2 (from Baa1) in March 2026, citing “persistent fiscal slippage.” The peso’s 12.5% devaluation since January has already inflated import costs for Éxito (BVC: EXITO), Colombia’s largest retailer, which derives 40% of revenue from imported goods.
- Market arbitrage opportunity: Short sellers are targeting Bancolombia (BVC: BCOLOMBIA), whose net interest margin (NIM) has compressed to 4.8% YoY due to Petro’s rate cuts. Analysts at Bloomberg Intelligence project a 20% decline in bank lending volumes if fiscal uncertainty persists.
- Political risk premium: Gaona’s book signals a hardening of the opposition’s stance, which could force Petro to either accelerate unpopular reforms (e.g., pension overhaul) or risk a 2026 legislative stalemate. The latter scenario would delay Ecopetrol (NYSE: EC)’s $3.5B capex plan, already scaled back by 18% YoY.
Why This Matters: The Petro Paradox and Colombia’s Fiscal Time Bomb
Gaona’s intervention isn’t just a legal polemic—it’s a real-time stress test for Colombia’s $340B economy. Since Petro took office in 2022, his administration has pursued three core economic levers:
- Fiscal expansion: Social spending surged 42% YoY in 2025, funded by debt issuance. Colombia’s public debt-to-GDP ratio now stands at 62.5% (up from 55% in 2021), exceeding the 60% threshold that triggered Moody’s downgrade.
- Monetary easing: The central bank cut rates from 11.25% to 7.5% in 2025, but inflation remains sticky at 8.9% (vs. The 4% target). The peso’s depreciation has offset gains from lower borrowing costs for corporates.
- Regulatory overhaul: Petro’s push to nationalize key sectors (e.g., healthcare, energy) has spooked foreign investors. Bancolombia, for instance, saw foreign ownership drop from 45% to 38% in 2025 as pension fund redemptions accelerated.
Here is the math: If Gaona’s argument gains traction—i.e., if markets conclude that Petro lacks the political capital to deliver on his reform agenda—Colombia’s 10-year sovereign bond yields could rise by 150-200 basis points, pushing borrowing costs for local firms to unsustainable levels. Reuters data shows that since 2022, every 1% rise in Colombia’s risk premium has corresponded to a 0.8% contraction in private-sector credit growth.
The Balance Sheet Tells a Different Story: How Corporates Are Bracing for Impact
While Gaona’s book is politically charged, its economic implications are already being priced into equity markets. Three sectors stand out:
| Company | Sector | Market Cap (May 2026) | YoY Revenue Growth | Net Debt/EBITDA | Key Risk Factor |
|---|---|---|---|---|---|
| Éxito (BVC: EXITO) | Retail | $12.4B | 5.2% (vs. 8.9% in 2025) | 1.8x | COP depreciation adding 3.1% to import costs (sourced from Éxito’s Q1 2026 earnings) |
| Bancolombia (BVC: BCOLOMBIA) | Financials | $18.7B | 3.7% (vs. 6.5% in 2025) | 1.2x | NIM compression to 4.8% (down from 5.9% in 2025) due to rate cuts and loan demand slowdown |
| Ecopetrol (NYSE: EC) | Energy | $28.3B | -1.4% (vs. 4.2% in 2025) | 0.9x | Delayed capex ($3.5B plan now at risk) and potential renegotiation of contracts under Petro’s “energy sovereignty” push |
Gaona’s book amplifies the policy uncertainty premium already embedded in these stocks. For Éxito, the retail giant’s margins are under pressure from both currency volatility and Petro’s push to raise minimum wages by 12% in 2026—a move that could add $1.2B to labor costs annually. Meanwhile, Bancolombia’s stock has underperformed peers by 18% since Petro’s re-election campaign began in earnest, as investors fret over potential capital controls or forced local ownership increases.
“Gaona’s intervention is a canary in the coal mine. The market is already pricing in a 30% chance of legislative gridlock by year-end, which would derail Petro’s entire reform agenda. For now, the peso is the canary—if it weakens another 10%, we’ll see capital flight accelerate.”
Market-Bridging: How This Affects the Broader Economy
Colombia’s economic instability isn’t an isolated event—it’s a regional contagion risk for Latin America’s emerging markets. Here’s how it cascades:
- Inflation linkage: Colombia’s 8.9% inflation rate is 2.3 percentage points higher than Peru’s and 1.8 points above Chile’s. If Petro’s policies fail to curb price pressures, the Andean Common Market (CAN) could face synchronized monetary tightening, squeezing growth across the region.
- Supply chain ripple: Éxito’s import costs are a microcosm of Colombia’s trade exposure. The retailer sources 60% of its inventory from China and the U.S., meaning COP depreciation directly inflates input costs for Carrefour (EUR: CA) and Walmart (NYSE: WMT)’s Latin American subsidiaries.
- Portfolio outflows: Since 2022, foreign holdings in Colombian equities have shrunk from $12.3B to $8.7B, per SEC Form ADS filings. Gaona’s book could accelerate this trend, particularly if it triggers a ratings downgrade from S&P or Fitch.
For the everyday business owner, the stakes are clear: higher borrowing costs, currency risk and regulatory whiplash. Small and medium enterprises (SMEs) in Colombia already face a 22% funding gap (per World Bank 2026 SME Finance Report), and Gaona’s critique—if adopted by the opposition—could delay Petro’s promised SME credit guarantees, leaving 78% of Colombian firms without access to affordable capital.
“The real damage isn’t in the book’s words—it’s in the market’s reaction. If Petro’s approval ratings stay below 35%, we’ll see a 20%+ sell-off in Colombian equities by year-end. That’s not hyperbole. it’s a function of the country’s debt dynamics.”
The Path Forward: Three Scenarios for Colombia’s Economy
Investors are now parsing three potential outcomes:
- Scenario 1: Policy Pivot (30% probability)
Petro accelerates reforms (e.g., pension privatization, tax hikes) to stabilize the peso and regain market confidence. Ecopetrol’s stock could rebound 15% if capex plans proceed, while Bancolombia’s NIM stabilizes above 5%. However, this risks a political backlash ahead of midterms.
- Scenario 2: Gridlock (45% probability)
Legislative paralysis forces Petro to govern by decree, triggering capital flight and a further COP devaluation. Éxito’s margins shrink another 2-3%, and Bancolombia’s loan growth stalls. Sovereign yields could hit 10%, making new debt issuance prohibitively expensive.
- Scenario 3: Early Elections (25% probability)
If Petro’s approval ratings fall below 30%, the opposition could push for snap elections in 2027. This would unlock a new policy cycle but also introduce extreme volatility. Ecopetrol’s stock could swing 25%+ in either direction, while SMEs face liquidity crises.
The most likely outcome? A hybrid of Scenarios 1 and 2, where Petro makes partial reforms but fails to restore fiscal credibility. This would keep Colombia’s economy in a low-growth, high-risk equilibrium—bad for corporates, worse for retail investors.
Actionable Takeaways for Investors
- Short-term: Hedge COP exposure via iShares MSCI Colombia ETF (NYSEARCA: ECO) puts or USD-denominated Colombian bonds (e.g., COLOMBIA 10Y). The currency pair COP/USD is the most immediate trade.
- Medium-term: Monitor Éxito’s gross margins and Bancolombia’s NIM trends. A margin contraction below 1.6x for Éxito or NIM below 4.5% for Bancolombia signals deeper trouble.
- Long-term: Watch for a shift in Petro’s rhetoric. If he pivots to austerity by Q4 2026, Ecopetrol and Bancolombia could rally 10-15%. If he doubles down on populism, expect further downgrades and capital outflows.
*Disclaimer: The information provided in this article is for educational and informational purposes only and does not constitute financial advice.*
