Colombia’s Finance Minister resigns amid tax reform crisis

RIO DE JANEIRO, BRAZIL – Colombia’s Finance Minister Alberto Carrasquilla resigned on Monday, a day after President Iván Duque ordered the withdrawal of the tax reform bill submitted to Congress that triggered street protests in the country, in which at least 19 people were killed.

Carrasquilla, in the government since the first day of Duque’s administration, was the author of the controversial tax reform; with the collapse of the bill and the president’s intention to replace it with another resulting from political consensus, his departure from office was expected.

“My continuity in the Government would make it difficult to build the necessary consensus quickly and efficiently,” said the official in his resignation letter.

To replace him as Minister of Finance, Duque appointed José Manuel Restrepo, current Minister of Commerce, Industry and Tourism, an economist and academic who has also been with Duque since the beginning of his government.

Carrasquilla, who was also Finance Minister for three years in Álvaro Uribe’s government (2002-2010), told Duque that the withdrawal of the tax reform bill “is an opportunity to initiate and to engage in a calm and constructive dialogue that will lead to the consensus the country urgently requires,” according to the portfolio.

THE VILLAIN OF THE CRISIS

The minister became the villain of the current crisis due to the harshness of the failed tax reform bill, which adversely affected the middle and lower classes by expanding the tax base and charging a 19% VAT on public services.

The social unrest triggered by the reform, which Duque tried to uphold until the very last moment even though the initiative emerged with no political support, gave rise to massive demonstrations of rejection throughout the country. They began last April 28th and have continued for 6 days.

“Quickly reaching a democratic consensus on a reform of the Colombian tax system is imperative,” said the Ministry of Finance in a statement in which it announced Carrasquilla’s resignation.

THE EGG CONTROVERSY

The indignation against the minister increased in mid-April when in an interview with Semana magazine on the impact of the tax reform on the pockets of Colombians he revealed that he was unaware of the cost of a basic food basket product, such as a dozen eggs.

“It depends on the quality, but I’d say that 1,800 pesos (about 47 cents) a dozen or so is what I have in mind,” he said, although the average price exceeds 4,500 pesos (about US$1.20), which also made him a source of ridicule in all the demonstrations.

When announcing Carrasquilla’s resignation, the Ministry of Finance cautioned that “in the absence of a gradual and orderly tax reform, the country’s macroeconomic stability would be seriously compromised” as the Government was aiming to collect 23.4 trillion pesos (about US$6,302 million) to improve the state of public finances and maintain social programs for the poorest.

The reform crisis has been felt in the financial markets, where the dollar rose over 2% and closed at 3,804 pesos, the highest rate in the past 30 days.

The Government has not reported whether Carrasquilla’s resignation entails the replacement of the whole economic team, and about the new minister, Duque noted that he has a master’s degree in Economics from the London School of Economics and a PhD in Management from the University of Bath (UK).

Restrepo, one of the most highly rated ministers in Duque’s cabinet, was also rector of the Universidad del Rosario, Colombia’s oldest university.

For the full picture, see our Brazil Tax Reform: Complete Guide.