Recent modifications to the Guarantees Law will support the economy’s continued rebound in the first half of 2022, buoying recoveries in Colombia’s regions. These changes will create new opportunities for B2G firms and support firms operating in the infrastructure space, including the construction sector. Clients should re-evaluate targets and strategies to reflect changes in public spending timelines in 2022. At the same time, clients should ensure corruption-mitigation strategies are in place to combat potential new corruption risks that could undermine sales prospects.
Overview
On October 20, Colombia’s Congress approved the 2022 government budget, including COP 68.2 trillion in new public investments, a 16% increase from 2021. Among the provisions in the 2022 budget is a controversial modification to the Guarantees Law, lifting some key restrictions on public contracting and the transfer of national funds to regional governments in the months before an election. The finance ministry estimates that the modifications to the Guarantees Law will permit an additional COP 4 trillion in 2022 investments that otherwise would not be possible. However, opponents say that lifting the restrictions opens the door for political corruption that will undermine the impact of investments.
Our View
Public investments will be key to Colombia’s economic recovery in 2022, and the dampening effects of the Guarantees Law on public expenditures is substantial, bringing a temporary reduction of approximately 25% in public contracting. In 2018, the law delayed public investments equivalent to approximately COP 14 trillion. As public investment ramps up further in 2022 amid a backlog of pandemic spending projects, modifications to the Guarantees Law will moderate interruptions to government investments and support continued progress for regional infrastructure spending and other investments. At the same time, political corruption will become a greater risk, particularly for spending by regional governments.
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