With the signature of all ministers, the government of Gustavo Petro declared this Monday the economic emergency in Colombia. The decision, announced last Friday by the Minister of Finance, Germán Ávila, and which took three days to materialize, constitutes a state of exception that allows the Executive to take measures that would normally have to go through Congress. It exposes the problem of state finances: it is, in the words of the decree, “a fiscal situation which has acquired a serious character, due to the occurrence of several economic events occurring and simultaneous which extraordinarily affect the current situation of the finances of the nation”. This decree allows, within 30 days, the government to take concrete measures, such as the creation of new taxes, which has been rejected by the opposition and businessmen, who point out that it is unconstitutional to decree an emergency to obtain by decree a tax reform like the one that Parliament refused to Petro a few weeks ago.
Concretely, the decree indicates eight reasons or causes of the state of exception, which will be the subject of debate. The first is the duty to comply with an order of the Constitutional Court which obliges the Executive to recognize the increase in health expenditure in the money sent annually to health promoting entities, or EPS, for each affiliated person. He estimates that this means spending an additional 3.3 trillion pesos (nearly $1 billion) in 2026.
The second is the need to increase security spending (“Guaranteeing the safety of citizens due to recent public disorder”). This includes the need to give an additional billion pesos to the National Protection Unit, responsible for protecting those at risk, and an additional 2.7 billion pesos for “adequate infrastructure and technologies” for the Public Force.
The third, and probably the most controversial, is Congress’s refusal to approve his tax reforms last year and this year. Parliament has the power to reject Government bills and, in this case, the decree does not determine the additional expenditure to be incurred.
The fourth concerns natural disasters “caused by the current winter wave”, although it only specifically mentions the “Paratebueno earthquake”, in reference to an earthquake that occurred last June in the center of the country, and which, with other expenses, would require an additional 0.5 billion pesos.
The fifth concerns ongoing judicial sentences, which amount to just over 1.5 billion prisoners. The sixth concerns bonds payable “acquired before the current government, which were awaiting payment and which must be paid in full”. Concretely, there are 1.5 billion in subsidies for electricity and gas consumption for the most vulnerable households and 1.6 billion in compensation for people who are victims of the conflict. The seventh is the impossibility of borrowing more and the “clauses derived from the unilateral measures of the American government”. and the last concerns the liquidity or liquidity restrictions it faces.
These arguments are fundamental so that the emergency can overcome the control that must be carried out by the Constitutional Court, which, like the entire judiciary, has been on vacation since last Friday. The Constitution requires that emergencies occur only when there is a “serious and untimely alteration” in the economy and when the government demonstrates that its normal functions are insufficient to deal with it. Various observers have questioned these demands, in particular the surprising and unexpected nature of the crisis.
However, the Court generally takes time to make a decision, much longer than the days or weeks it takes the Executive Branch to issue executive orders that take actions protected by a state of emergency. In the case of the failure of the La Guajira emergency, the Constitutional Court took 4 months and 6 days to issue a decision, in which it only kept in force the part of the shock that affected the water supply. In Catatumbo, it took 3 months and 5 days to maintain the declaration on two issues that had just occurred (the ELN attacks and the humanitarian crisis due to the displacements it caused) and to cancel it for five others (the prolonged presence of illegal groups in Catatumbo, the concentration of coca crops or damage to infrastructure).
In the current emergency, although there are still no concrete measures, the president himself has indicated that he hopes to increase collection with more taxes “on the mega-rich.” In fact, a draft executive order has been circulating that essentially repeats one of the harsher versions of his recent failed tax reform. Among them are the increase in the tax on financial movements from 0.4% of each transaction to 0.5%; expand the wealth tax for fortunes starting at about 2 billion pesos (about half a million dollars) with rates up to 5 percent; and increase taxes on activities that have negative effects, such as the consumption of alcohol, cigarettes or online gambling. Peto also affirmed what appears to be another measure: “The economic emergency implies a reduction in the salaries of members of Congress,” he responded to opposition senator Ciro Alejandro Ramírez in X.
It is for this reason that several voices have asked the Constitutional Court to meet during the judicial vacancy, a possibility which opens the door to another separate legal debate, so that it can make a decision soon. Whether it meets or not, Christmas and the end of the year will likely be surrounded by new taxes, new economic and legal debates and the shadow of a state of emergency as campaigns for the legislative elections begin in March.
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