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Colombia | Presidential elections update: Latest polls results and first insights from candidates' economic advisors

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April 30, 2014 (www.investorideas.com newswire) Santos continues leading vote intentions according to the latest polls and would be reelected president in a second round. However, the candidate of former president Alvaro Uribe's party, Oscar Iván Zuluga, has gained ground in the last weeks, bringing some challenges to Santos.

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According to the Gallup's poll (our preferred survey), Juan Manuel Santos would obtain 32% of votes in the first round (to be held on 25-May), Oscar Iván Zuluaga, candidate of former president Alvaro Uribe's party (Centro Democrático), would get 20.5%, Martha Lucía Ramírez, Conservador party's candidate, 11.2%, Enrique Peñalosa, former Bogotá's Mayor and Alianza Verde's candidate, 10.1% and Clara López, from the left-wing party Polo Democrático, 7.1% (see chart 1).

In general, while the vote intention for Santos, Ramírez and Peñalosa remained relatively stable in the last month, Zuluaga increased by 5pp, almost doubling the figure seen two months ago (10.8%).

Gallup's survey continues showing that the highest support for Santos is at the North (44.8% of voting intention) and the Southwest (36.1%) of the country, obtaining the stronger support in the lowest income bracket (36.4%). Meanwhile, in Bogotá the winner would be Peñalosa with 23.6% of votes vs. Santos' 22.8%, which compares to 20.9% and 27.3% in Mar-14 survey, respectively. This might be a result of the current political instability in Bogotá as the Mayor (Gustavo Petro) was removed from his post and reinstated by Santos in only one month.

As the first round gets closer, the blank vote has receded from 28% in Feb-14 to 15.9% currently.

As for the second round, Gallup´s poll continues showing an important advantage for Santos although the margin has reduced in all cases, particularly against Zuluaga which went from 24pp in Feb-14 and 18pp in Mar-14 to 12pp currently (see chart 2). Thus, it would be expected to have a second round with Santos and Zuluaga according to this survey as the advantage of Centro Democrático's candidate on Ramírez (who stands at the third place) is considerable.

Other polls released this week (Datexco and Ipsos Napoleon Franco) point towards the same result, namely, that Santos would be reelected in a second round while Zuluaga would have gained almost 10pp for the first one last month. However, the most relevant difference among these two surveys and Gallup's is that either Zuluaga or Peñalosa could obtain the second place as both Datexco and Ipsos show a technical tie between these two candidates (see charts 3 and 5). In fact, it is worth mentioning that Datexco and Ipsos' polls show that the narrowest margin in a second round would be in the scenario where Santos competes against Peñalosa (see charts 4 and 6).

Interestingly, Datexco asked respondents an additional question about which candidate they think will effectively win the electoral race. According to the answers, 42% consider that Santos will win the elections, followed by Zuluaga (15%) and Peñalosa (14%).

On the other hand, we highlight that a debate among candidates' economic advisors was carried out this week. Below we present the most relevant points according to the financial newspaper Portafolio.

Juan José Echavarría (Santo's advisor). The former member of the BanRep affirmed that the current scenario of the Colombian economy is very positive, suggesting that it is best moment of the last 20 years. He is expecting lower capital inflows from foreign investors as the US monetary policy normalizes, which would help industry sector amid a weaker COP. He stated that a tax reform is necessary to have a more progressive system.

Luis Fernando Hoyos (Zuluaga's advisor). The former Colombia's ambassador before the OAS, noted that the work made by the current government in the economic front has been mediocre as the income distribution continues to be highly unfair. He affirmed that there are signs of Dutch Disease so that capital controls would be necessary to avoid speculative flows and achieve a higher competitiveness. The Zuluaga's economic team would work in reducing infrastructure and energy costs, granting more resources for education and consolidating the mid-class. Finally, he considers that the financial transactions tax (4x1000) should be maintained for seven more years while the wealth tax must be analyzed.

Daniel Castellanos (Peñalosa's advisor). The former Asobancaria's Head of Economic Research affirmed that the Colombian economy is doing well currently but the outlook is not so positive in the long term as the government failed to adopt structural measures in last years. He considers that the BanRep made a mistake last week when it decided to increase the repo rate, among other reasons, because it may generate further appreciation pressures on COP. Finally, he affirmed that a tax reform that allows to collect two additional points of GDP is necessary.

Juan Mario Laserna (Ramírez's advisor). The current Senator considers that the government took advantage from the last years' high markets liquidity to foster economic growth although he named as a ‘tragedy' that the current administration did not build the roads necessary to increase competitiveness amid record low interest rates. He also thinks that the infrastructure's financing model collapsed so that a more efficient one is required. In order to avoid a Dutch Disease, Laserna would create a sovereign wealth fund abroad to avoid further appreciation pressures on COP. Finally, he mentioned that the 4x1000 tax must be eliminated and the oil-mining sector should pay more taxes.

In general, we continue to consider that the probability of a new government that can jeopardize the macroeconomic stability and investment climate is rather low. Regarding Zuluaga, as the candidate of former President Uribe, seems to have the same objectives that President Santos has in most fronts, even though the means to get them might differ (e.g. peace talks). Thereby, changes in economic policy are not expected under this scenario. However, it is worth mentioning that should Peñalosa win the elections, some volatility might arise temporary in the local markets as foreign investors would be cautious regarding the leftist members of his party (Alianza Verde is the result of the combination of two former parties, Progresistas and Partido Verde) and the less knowledge they have on him. On this sense, further details of Peñalosa's government plan will be relevant.

For charts, tables and the full report, see the attached file.

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