The surprise landslide victory of pro-Uribe candidate Juan Manuel Santos in the first round of Colombia’s presidential elections was greeted with relief by the markets.
Peso bonds rose on Monday, after Sunday night’s news of Santos’ win, pushing bond yields to their lowest level since early May. Local brokerage Corredores Asociados attributes the rise to the election result reducing uncertainty about the country’s next leader.
Polls had predicted a tight race, with both candidates winning around 35% of the vote, but Santos won with 46.5%, just short of the 50% needed to win the presidency outright, to Mockus’ 21.4%.
The two will now face each other in a second round on June 20, which Santos is expected to win easily.
Santos, who has served as minister of trade, finance, and defense, and was part of popular incumbent President Uribe’s government, is considered more of a known quantity by the markets. He pledges to continue many of Uribe’s business-friendly policies, as well as the hardline security policies which have made the country safer for investors.
Mockus is also considered to be market-friendly. He told the Washington Post in an interview before the election; “I’ve privatized companies, reduced the workforce, which is typically neoliberal.”
However, the green candidate also pledged to raise tax on both individuals and businesses, and said the state must be “hard” on the rich.
Mockus told the Post “I think that the market alone can be crazy. You need strong institutions to put order in the market.” His expected choice of finance minister, Salomon Kalmanovitz, announced plans to end corporate tax breaks.
Uribe criticized Mockus’ tax policies indirectly, warning that “We have to be very careful, some of the proposals that one hears of removing investment stimuli scare me a lot.”
Santos, meanwhile, promised to get rid of transactions tax, lowering the cost of banking operations. The Partido de la U candidate said that raising income and property taxes would spell death for the middle class and would stunt economic growth and employment.
These policy differences caused Santos to appear more pro-market than his rival. The Financial Times comments that, although both candidates are “market-friendly,” Santos’ victory suggests that “South America is turning away from the left.”
The markets could also have been spooked by a future president Mockus’ inability to push measures through Congress. The candidate admitted that, with only four seats in the House of Representatives and five in the Senate “I will just have to present the same bill many times to get it approved.”
Santos’ Partido de la U, on the other hand, won more seats in than any other party in March’s congressional elections.
The urgent need for healthcare reform and action to reduce the fiscal deficit make Mockus’ lack of party support a particularly important issue.