Colombians look to Miami as Gustavo Petro’s election sparks capital flight fears
Real estate companies in Miami reported an increase in requests from Colombians wanting to transfer money out of their country and buy property in the United States after the victory of Gustavo Petro, the country’s first truly left-wing president, last month. .
Colombians are asking about existing homes, suggesting they may be considering moving to the United States rather than just investing money there, the companies said. Last year, most requests were for investments in projects that had not yet been built.
This trend is part of the flight of regional capital from Latin America following the recent election results. Estate agents have also noted an increase in interest from Chileans and Peruvians over the past year following the election of leftist presidents in their countries.
“After Petro was announced as the winner, we immediately started getting calls,” said Daiana Quiceno, vice president of sales at PMG Residential in Miami. “My phone was bombed.”
“Even before the first round of elections, we saw a big increase,” she said. “Between round one and round two it calmed down a bit – people were saying ‘we’ll wait and see what happens on election day’ – but within 24 hours of the election we were bombarded with Colombia’s inquiries.”
Petro won the Colombian elections on June 19 and will take office on August 7.
His policy proposals baffled wealthy Colombians. He wants to impose a wealth tax on the country’s 4,000 largest personal fortunes, raise income taxes on the wealthiest people and force corporations to pay around 70% of their profits in dividends.
His projects have also destabilized foreign investors, particularly in the hydrocarbons sector. Petro pledges to ban all new oil and coal exploration, cancel hydraulic fracturing pilot projects and ban surface mining in a bid to wean Colombia off fossil fuels.
The Colombian peso has lost 12% of its value against the dollar since Petro’s victory, although economists say that’s mainly due to a recent surge in the dollar that has affected all emerging market currencies. The peso has followed a largely bearish trajectory over the past decade and has lost a third of its value against the dollar during the four years of the outgoing right-wing government of Iván Duque.
It is currently trading at an all-time low of 4,390 to the dollar. A local bank has predicted that if Petro enacts its plan to curb oil and coal exploration, it could fall to 7,000 per dollar by the end of its term in 2026.
Craig Studnicky, president of RelatedISG International Realty, a U.S. real estate company, said many Colombians contacting his Miami office “want existing inventory right now.”
“It tells me that they’re not just planning to move their money, but they’re planning to hang out here in Miami,” he said. “Before, it was pre-construction condos that people were looking for, but now they’re asking what’s available on the resale market. They are not investors per se, they are families.
Prestige Realty Group’s Tony Rodriguez-Tellaheche said some Colombians seem to be waiting to see what Petro’s government really looks like, “but others are saying ‘we’re very scared for our money and we think if we wait it’s okay. be too late.”
Miami has long been a haven for Latin Americans fleeing unrest, persecution or economic volatility in their region. Approximately 70% of Miami Dade County’s population is Hispanic, and half of the county’s 2.7 million residents were born outside the United States.
In Colombia, a tax lawyer, speaking on condition of anonymity, told the Financial Times that his firm had received a flurry of inquiries from anxious citizens in recent months.
“They fall into three categories,” he said. “The first group simply wants to reduce their exposure to Colombia by putting money in a foreign bank account or perhaps investing in real estate. The second group wants to go further and relocate away from Colombia to reduce its exposure to possible tax hikes.The third group – the smallest – have dual nationality and want to completely renounce their Colombian citizenship and leave the country.
While some wealthy Colombians appear to be moving money to the United States, most American businesses in Colombia appear determined to stay the course, citing the country’s relatively strong institutions as a reason to stay.
“These companies have a long-term vision, about 50 years, that is, 12 governments,” said Ricardo Triana, executive director of the Council of American Companies (CEA), an organization representing more than 110 American groups. operating in Colombia. “They invest in the country, not in any particular government.”
He pointed to recent engagements by energy company AES Corporation, agribusiness PepsiCo and coffee producer Green Coffee as evidence that US companies still had faith in Colombia.
However, Triana acknowledged that the outlook was less rosy for extractive companies such as Drummond, which owns coal mines in northern Colombia, and ExxonMobil, which is working on a hydraulic fracturing pilot project.
Many economists say Petro’s fossil fuel policy will hit Colombia’s economy hard. Oil and coal account for more than 70% of all royalty payments in the country, 8% of tax revenue and 30% of foreign direct investment.
Despite concerns over Petro’s policies, his actions since winning the election have helped ease investor fears.
Last week he appointed José Antonio Ocampo, a respected economist, as his finance minister. Ocampo previously held this position and had a distinguished career at the central bank and the UN. “His long career in academia and policymaking should be welcomed by market participants,” Citibank noted.
William Jackson, chief emerging markets economist at Capital Economics, said that while growth and private investment may slow under the new government and concerns about public debt may increase, “we suspect that a Petro may not be as radical as some fear.”