The Duke of Colombia has withdrawn his tax reform bill after violent protests

Colombian President Iván Duque on Sunday called on Congress to withdraw the much-criticized tax reform bill after at least six people were killed in violent street protests.

The contested president said his government will soon introduce an alternative bill “that is the fruit of consensus”. He stressed the need for some kind of tax reform to help stabilize Colombia’s finances and cover the huge growth in social spending caused by the loss of income and the coronavirus pandemic.

“Reform is not a whim. Reform is needed, ”he said in a video address, accompanied by nearly a dozen members of his cabinet.

The most notable absentee from the video was Finance Minister Alberto Carrasquilla, the architect of the reform. This sparked speculation on social media that he was about to resign or be fired. Some commentators and some opposition politicians have said the protests will continue until Carrasquilla leaves office.

The Duke confirmed that some of the contents of the original invoice would be suspended, including a plan to increase the value added tax on goods and services. He also had to back down on his plan to increase the VAT on fuel.

Instead, Duke suggested that the new texts increase taxes on companies.

Reform is the most important piece of legislation in Colombia this year. The level of investment in the country depends on this.

Both Fitch and Standard & Poor’s have negative forecasts for Colombia BBB- long-term debt issuance. That’s just an indentation that is uninvested or above the garbage situation. Moody’s rates Colombia a Baa2, two notches above the garbage.

If the reform fails or is diluted, there are great opportunities Colombia it will degrade, falling from a small group of nations with a Latin American level of investment that includes Mexico, Chile, and Peru.

That would be a blow to a country that is proud of fiscal justice, despite long civil strife and chronic legitimacy. Compared to most Latin American nations, Colombia has not defaulted on its debt since the 1930s and has had an investment level since 2011.

Protests against the reform began on Wednesday with a nationwide strike that drew more people than expected. Protests have continued since then and have become violent, especially in Colombia’s third-largest city, Cali, when shops were robbed and buses burned.

The U.S. NGO Human Rights Watch said it had confirmed six deaths related to the protests, four of them Calin. A policeman was killed in Soacha, a small satellite town on the edge of Bogota. The number of deaths by local NGOs reached 20.

The government initially aimed for a $ 1.4 billion or $ 4.1 billion reform of GDP, eliminating some tax exemptions and expanding the tax base, among other measures.

Despite the backlash, Duque’s center-right Democratic Party holds less than 20% of the congressional seats and could be struggling to get a new bill through Congress.