Colombia Presidential Favorite Gustavo Petro Wants to Form a Global Anti-Oil Bloc

Colombia’s presidential front-runner Gustavo Petro is calling on ideological allies across Latin America and the world to join him in forming a new bloc to lead the economy away from fossil fuels.

Oil and coal currently account for nearly half of Colombia’s exports, but Petro says if he becomes president this year, he’ll push to start phasing out these industries in favor of a knowledge-based, tourism-driven economy. If Colombia immediately halts oil exploration, but continues to produce the crude it’s already drilling, it would have 12 years to manage the transition, he said in an interview from Bogota.

Senator Petro, 61, said his vision involves “a grand coalition of powers that can speak much more strongly in a global context to fight against climate change, and to transition Latin America toward economies that are decarbonized, productive and based on knowledge.”

Such an alliance will hopefully include Chile’s president-elect Gabriel Boric, and Brazil’s Luiz Inacio Lula da Silva, he said Thursday. It may not include Mexican President Andres Manuel Lopez Obrador, who he said favors extractive industries.

Petro said he recently spoke to Spain’s Prime Minister Pedro Sanchez about his proposal.

While such a global alliance would not be a new concept — world leaders have been meeting for years to try to cut fossil fuel dependence—it is unusual for a developing country that’s highly dependent on energy exports to be so enthusiastic about sacrificing its biggest source of foreign currency.

The peso weakened the most in emerging markets on Friday, to as low as 4,015 per dollar, as traders reacted to Petro’s comments.

“The market didn’t like these remarks, given the importance of oil both for national output and the current account,” Banco de Bogota said in a note.

The rise of green politics implies tough choices in a region whose economies depend on oil and mining. Petro argues that Colombia can phase out fossil fuel production without jeopardizing the fight against poverty and infant malnutrition.

Attracting tourists to experience the nation’s natural beauty offers the best opportunity to replace lost oil revenues but, for this to happen, the country needs peace, he said.

Peace Talks

Five years after the Marxist guerrilla group known as the Revolutionary Armed Forces of Colombia, or FARC, laid down its weapons, the countryside is still overrun with illegal armed groups. Petro said that swift negotiations with dissident FARC groups who turned their back on the peace process, and the guerrilla force known as the ELN, could dismantle these organizations.

Petro himself was a member of the guerrilla force known as M-19, but demobilized more than three decades ago.

If he wins, he would be the first leftist ever to govern Colombia, though he says that “left-wing” and “right-wing” are now obsolete 20th century terms. The new fault line is between the “politics of life”, which defends the environment, and the “politics of death”, which advocates economic models based on the extraction of fossil fuels, in his view.

As an example of a successful economy from which Colombia might learn, Petro cited South Korea, which became wealthy without many natural resources.

Weaker Peso

A poll published last month showed Petro leading with 25%, more than double the support of his closest rival, independent candidate Rodolfo Hernandez, who had 11%. Colombians vote in May, with a possible runoff in June. Congressional elections are scheduled for March.

Petro’s environmentalist proposals would represent a radical departure for one of the world’s biggest coal exporters, where deforestation of the Amazon by cattle ranchers is surging. But since he’s unlikely to command a majority in congress, he may find it difficult to advance his economic agenda if he wins.

Colombia produces more than 700,000 barrels of crude a day, making it the biggest South American producer after Brazil and Venezuela. Much of it is delivered by state-owned Ecopetrol SA.

In part because of Petro’s strong showing in the polls, Colombian assets are trading with significant risk premium and investors will remain wary until that changes, Barclays economists Alejandro Arreaza and Juan Prada wrote in a report published this week. The peso has weakened 13% over the last year, the worst performance in emerging markets after the Turkish lira and the Argentine peso.

Petro says he can’t be held responsible for market moves that have happened when he isn’t in office.

On fiscal policy, he takes a conservative, orthodox approach, but holds less conventional views in other areas.

As mayor of Bogota from 2012 to 2015 he cut debt, and now says Colombia needs to lower its fiscal deficit. To do this, he proposes taxing “fertile, unused land” and a “substantial” increase in the levy on dividends.

Interest Rates

The candidate also urged Colombia’s central bank not to raise interest rates any more, even if the U.S. Federal Reserve starts to tighten policy.

“If interest rates rise in Colombia, the economic recovery is killed off,” Petro said. “If they go up, the capacity for productive investment in the country decreases because it shifts toward other types of investment of a more speculative and financial type, than of a productive kind.”

Colombia’s central bank has raised interest rates by 1.25 percentage point since September, to 3%, in a bid to rein in inflation which has surged above its target range. Economists expect more increases this year.

After he left the guerrillas for democratic politics, Petro gained prominence in the senate as a critic of Alvaro Uribe, who was president from 2002-2010. As mayor, Petro boosted subsidies on water and bus fares for the poor.

In the last elections four years ago, he made it to the second round, but lost to the current President Ivan Duque. Since then, he has been back in the senate.

Elsewhere in the Andes, Peruvians last year elected Pedro Castillo from the socialist Peru Libre party to the presidency, while Boric, a former student leader who describes himself as a moderate socialist, was voted president of Chile.

Petro, if he wins, would be part of that change.

“My government will be one of transitions,” Petro said. “From extraction to production, from authoritarianism to democracy, from violence to peace.”

—With assistance from Malu Poveda.