Duque Pledges Tax Breaks in a Bid to Quell Colombian Protests

(Bloomberg) -- President Ivan Duque pledged tax breaks for the poorest Colombians in a bid to quell anti-government demonstrations now in their sixth day.

The poorest 20% of the population will be able to reclaim all value-added tax on purchases, Duque said at the presidential palace during meetings with protest leaders.

Duque also announced three days per year on which some products will be exempt from the levy, and a reduction of health-care costs for some pensioners. The proposals will be included in the government’s tax bill, and must be approved by congress.

Demonstrations against Duque’s government continued Tuesday, as the death of a teenager at the hands of anti-riot police further enraged protesters. Colombia is the latest Andean nation to face mass unrest in recent weeks. Protesters in Ecuador and Chile forced their governments to ditch austerity measures, while in Bolivia President Evo Morales was driven from office.

Reforms Doubtful

The protests will probably force the government to ditch plans to overhaul the pension and tax systems, said Gabriel Silva, a former defense minister and Colombian ambassador to Washington.

“The government won’t be able to appease the protesters without compromising,” Silva said. “It will be quite challenging for Colombia to advance in reducing its fiscal imbalances if it can’t pass the structural reforms that are needed.”

The tax rebate will cost the government about $630 million per year, according to Deputy Finance Minister Juan Alberto Londono.

The peso extended losses after Duque’s announcement, falling 1.2%, the most in emerging markets. The benchmark Colcap index and the nation’s sovereign bonds also dropped.

“Markets are nervous of street protests and what they can mean for policy,” said Kieran Curtis, investment director at Aberdeen Asset Management in London, which holds Colombian debt.

The nation’s protests stem from a range of issues, including the government’s education and labor policies, as well as the unsolved murders of social leaders. Heavy-handed police tactics have given marchers an additional grievance.

Demonstrator Killed

Dilan Cruz, who local media said was 18, died on Monday after being hit in the head by a projectile fired by anti-riot police at a protest in Bogota on Nov. 23.

Cruz had become a symbol of the demonstrations after video clips circulated showing him slumped face down an instant after the sound of a shot. Demonstrators chanted his name while he was in intensive care and have held vigils for him.

Duque met some of the protest organizers Tuesday, including the heads of the main labor unions and student leaders as part of his pledge to hold a “national dialogue.” He said in a radio interview that he also is considering a cabinet reshuffle.

The protest leaders announced they would continue with marches.

To contact the reporters on this story: Oscar Medina in Bogota at omedinacruz@bloomberg.net;Ezra Fieser in Bogota at efieser@bloomberg.net

To contact the editors responsible for this story: Walter Brandimarte at wbrandimarte@bloomberg.net, Matthew Bristow, Andrea Jaramillo

©2019 Bloomberg L.P.