The Colombian Senate passed a law that upset investors

(Bloomberg) — Colombia’s Senate voted to approve a constitutional reform aimed at increasing government transfers to regional governments, ignoring warnings that the bill could be financially unsustainable.

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Lawmakers approved the reform in the sixth of eight debates required for it to become law. Now he needs two extra votes in the lower house, where the government has a majority.

The bill requires the government to increase transfers to cities and provinces from the current 26% of their revenues to 39.5% over 12 years, starting in 2027. income for 10 years.

Finance Minister Ricardo Bonilla demanded a reduction in the 37% threshold and proposed extending the implementation period to 15-20 years, but senators chose to ignore his concerns. The finance chief did not take part in Tuesday’s debate.

Constitutional reform also requires the adoption of a separate bill clarifying the responsibilities of regional governments to avoid duplication of responsibilities of the central government.

Although the reform does not require government financial approval as it is a constitutional amendment, it will be subject to scrutiny by the Constitutional Court once final approval is granted.

As the bill moved through the Colombian Congress, the sell-off of Colombian assets intensified. Investors are now grappling with the possibility of further deterioration in an already fragile financial position.

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