Colombia Political Crisis

Radical reforms trigger capital flight and economic uncertainty.

Plausibility:

• Major tax/pension/healthcare reforms face strong opposition
• Constitutional crisis or institutional breakdown
• Social unrest similar to 2021 protests
• International investors lose confidence

Rationale:

• Political risk premium weakens COP significantly (10%)
• Fiscal pressures and monetization drive inflation (8%)
• Nominal wage growth (9.1%) mostly catch-up to inflation
• Real wage growth minimal (1%) as economy stagnates
• Public sector employment more stable than private
• Uncertainty increases precautionary defaults