Colombia’s COLCAP Cheers Constitutional Ruling Despite COP 12T Fiscal Gap

01 Market Snapshot

02 Equities — Markets Cheer the Court, Not the Fiscal Gap

The COLCAP Colombia today rose 0.36% to 2,294.20, closing near the session high and at its strongest level in over a week. This is part of The Rio Times’ daily coverage of Colombia’s stock market and Latin American financial markets.

The market’s reaction to the Constitutional Court’s emergency decree ruling was telling. The ruling blocks COP 12 trillion (~US$3.1 billion) in emergency revenue and widens the budget gap — ostensibly a fiscal negative. But the COLCAP rallied, not because the fiscal hole is good news, but because the court’s assertion of constitutional limits is precisely the institutional guardrail that foreign investors need to see. Petro’s pattern of bypassing Congress through emergency decrees — this is the fourth such decree to be struck down — had been eroding investor confidence in Colombia’s institutional framework. The court’s consistent defense of constitutional boundaries signals that Colombia’s checks and balances remain functional, regardless of executive overreach.

Wednesday’s intraday action reinforced the bullish interpretation: the index opened at 2,286, dipped to 2,253 as the court ruling hit newswires (a knee-jerk fiscal-negative reaction), then rallied 41 points to close at 2,294 near the high. The close near the high — with the session low occurring early — is a bullish reversal pattern that suggests dip-buyers are growing more confident.

03 The Constitutional Ruling — Fiscal Hole Gets Deeper

The Constitutional Court’s April 9 ruling declaring Legislative Decree 1390 unconstitutional is the latest in a series of judicial defeats for Petro’s fiscal strategy. After Congress rejected the government’s financing law in late 2025, Petro declared an economic emergency and imposed taxes by decree — including liquor duties, financial sector surcharges, and revised wealth assessments. The Court provisionally suspended the emergency in January and has now made the suspension permanent.

The practical impact: the government cannot collect COP 12 trillion (~US$3.1 billion) through these emergency measures. Combined with the earlier COP 4.2 billion budget shortfall from the Senate’s rejection of the financing law, the total unfunded gap in the 2026 budget now exceeds COP 16 trillion. Petro has called for a fresh financing law through Congress, but with the May 31 election approaching and Congress in pre-election mode, the likelihood of meaningful fiscal legislation in the remaining weeks is negligible. The fiscal deficit — already projected at −6.6% of GDP by JPMorgan — will almost certainly be larger than the government’s 5.1% target.

04 Technical Analysis — COLCAP Daily

The chart shows the COLCAP approaching the 2,300–2,305 resistance zone from below with improving momentum. The close at 2,294 is just 8 points below the ceiling that has capped the index for three weeks. The 50-day MA cluster at 2,238–2,248 provided support during Wednesday’s intraday dip, and the 200-day MA at 2,021 confirms the secular uptrend. The Bollinger Bands are beginning to expand — the upper band at 2,328 and lower at 2,149 suggest the narrowing range is preparing for a directional move.

The MACD at 12.73 is positive with signal at 4.59, and the histogram at −8.14 is narrowing — less negative than the prior session, suggesting the bearish pressure is fading. The RSI at 55.25 is neutral with a mild bullish tilt, consistent with a market building toward a breakout rather than breaking down. The secondary oscillator at 49.77 is dead neutral. The technical read: the COLCAP is coiling for a move. The close at 2,294 — the nearest to 2,300 without rejection from above — increases the probability that the next test succeeds.

05 Key Levels

06 News in Focus

Fourth Emergency Decree Struck Down — Pattern Established

Wednesday’s ruling marks the fourth time Colombia’s courts have struck down a Petro executive decree on fiscal matters. The pattern is clear: Petro proposes reforms through Congress, they fail, he attempts to impose them by decree, and the courts block him. This cycle has cost the government credibility with rating agencies and international investors, but paradoxically it has also demonstrated that Colombia’s institutional framework — unlike Venezuela’s or Nicaragua’s — cannot be circumvented by executive fiat. For equity markets, the court’s independence is a feature, not a bug: it guarantees that the next administration will inherit a functional constitutional order regardless of how the final months of Petro’s presidency unfold.

The Fiscal Math — COP 16 Trillion Unfunded

The cumulative fiscal gap is now approximately COP 16 trillion — combining the COP 12 trillion blocked by Wednesday’s ruling with the COP 4.2 trillion shortfall from the Senate’s earlier rejection of the financing law. The 2026 budget of COP 546.9 trillion was already insufficient to cover fiscal needs before this ruling. The government’s options are limited: spending cuts in the final months of Petro’s term (politically difficult), increased borrowing (expensive at 11.25% rates), or relying on the $110 Brent oil windfall to partially offset the gap through higher-than-budgeted Ecopetrol dividends and petroleum tax receipts.

Election Positioning — 52 Days

With the May 31 first round now 52 days away, the fiscal situation is increasingly being framed as the central campaign issue. The next president will inherit: a suspended fiscal rule (through 2027), a fiscal deficit above 6% of GDP, public debt at record highs above 60% of GDP, BanRep at 11.25%, a 23.7% minimum wage hike with its cascading costs, and an energy sector where exploration has been frozen. Baker McKenzie’s analysis concludes that a major tax reform is unavoidable after the August 7 inauguration. The COLCAP at 7.9x P/E is pricing in the expectation that the next government will begin fiscal repair — the upside scenario is a center-right victory that triggers re-rating; the downside is continuity without reform.

07 Global Context

Wednesday’s session benefited from the continued LATAM rally: Mexico’s IPC broke 70,000 on Tuesday, Argentina’s Merval reclaimed 3 million, and Chile’s IPSA surged 3.23%. The positive regional sentiment provided a tailwind for the COLCAP’s modest recovery. Oil at $110 continues to support fiscal revenues through the Ecopetrol channel, and gold above $4,700 supports Mineros. The peso near COP 3,660 per dollar is stable for now, but most forecasters see depreciation to COP 4,000–4,200 by year-end as Banxico and BanRep rate differentials evolve. The ELN security situation — with over 100 killed and 55,000 displaced since January — continues to disrupt mining and energy operations in Chocó, Cauca, Nariño, and Arauca.

08 Looking Ahead

The COLCAP is approaching 2,300 from its strongest position yet — the close at 2,294, with improving MACD and neutral RSI, sets up a potential breakout if Thursday’s session follows through. A close above 2,305 would be the first since late March and would target 2,328 (upper Bollinger) and potentially the February highs. A failure at 2,300 once more would reinforce the range and delay the breakout until after the election.

The catalysts ahead are now stacked: the court ruling’s aftershocks (will Petro attempt another decree or accept the ruling?); the Santa Marta fossil fuel conference in 19 days; the next BanRep meeting (where the fiscal chaos may influence the board’s rate calculus); and the accelerating election campaign. The market’s positive reaction to the court ruling is the most important signal of the week — it tells us that institutional investors are increasingly pricing in a post-Petro transition, and they view constitutional order as more important than short-term fiscal arithmetic.

This report was published by The Rio Times. For daily coverage of Latin American markets, read our Latin American Pulse and Brazil Morning Call.

Deep Dive

For the complete picture, read our in-depth guide: Latin America Stock Markets 2026: Ibovespa, Merval, COLCAP, IPSA and IPC Guide

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