New tax proposal reignites nationwide protests in Colombia

New tax proposal reignites nationwide protests in Colombia

On April 28, thousands of Colombians started a nationwide strike against President Ivan Duque’s tax reform proposal aimed at mitigating the country’s economic crisis amidst the COVID-19 pandemic. The protest has since escalated into one of the largest anti-government protests Colombia has seen in decades, severely impacting supply chains across the country.

Protesters have erected road blockades throughout the country on major highways and have disrupted port, airport, and export operations. Outbreaks of violence between protesters and police intensified between May 4-5 after authorities sent an additional 2,100 officers to quell the demonstrations. At least 24 people have been killed, more than 700 have been injured, and approximately 1,181 cases of police violence have been documented since the demonstrations began.

The Duque administration’s tax reform bill was intended to raise 23.4 trillion Colombian pesos (USD 6 billion; EUR 5.11 billion) by reducing the threshold at which salaries are taxed, affecting anyone with a monthly income of 2.4 million Colombian pesos (USD 624). The new bill would have also increased the VAT tax to 19 percent, significantly increasing the cost of basic goods and services. The proposed increase in prices is set against the backdrop of the COVID-19 crisis, which has disproportionately affected the economic wellbeing of Colombia’s middle and lower classes. The government has reached an agreement with protest leaders to allow the movement of food, gasoline, and medicines through blockades after persistent roadblocks resulted in shortages of such goods.

Following several days of unrest, President Duque scrapped the bill on May 2. However, protests continued, primarily in the capital city, Bogota and the southwestern city, Cali. What started as a demonstration against the new tax proposal has quickly expanded into localized protests over poor healthcare, inadequate pensions, violence, inequality, corruption, and the administration’s slow implementation of the 2016 peace deal with the Revolutionary Armed Forces of Colombia (FARC). For many Colombians, the tax reform was the final provocation from Duque’s administration. Outrage had been building even before the pandemic. In November 2019, nationwide protests erupted over a slew of economic reforms that the president implemented, including eliminating the state pension fund, increasing the retirement age, and refusing to raise the minimum wage. Other groups joined to pressure the government to commit to the peace agreement with FARC. The COVID-19 pandemic and associated lockdown measures halted the protests in 2019, but the social discontent with the current administration lived on.

Protesters target major highways

Since the onset of the strike, protesters have persistently erected roadblocks on major trade thoroughfares in Bogota, Cali, Medellin, and Barranquilla. Highways in Cali, including Carrera 1, Carrera 8, Carrera 94, the Pan-American Highway, and other roads throughout the city faced intermittent blockades. On April 30, protesters obstructed roads which connect to the industrial area of Valle in the municipality of Yumbo, and roads leading to the food supply plant Cavasa in Candelaria. The transport of food cargo into the city of Cali is facing disruptions due to a blockade on the Juanchito bridge in Poblado Campestre. Outbreaks of violence have been reported against drivers who refuse to pay for passage on the blocked roads in Candelaria. Truckers joined the strike on May 3 and helped civilians continue to block motorways. Among the blocked roads in Bogota are Avenida Caracas, Avenida Boyoca, Avenida Ciudad de Cali, Avenida Suba, and Avenida Villavicencio.

Container movements at ports of Cartagena and Buenaventura disrupted

Container terminals in Colombia continue to operate within their premises despite ongoing demonstrations. However, container movements from and to the port terminals have been disrupted due to ongoing blockades of access roads, mainly near the ports of Buenaventura and Cartagena. This has caused cargo to remain stored in ports and in different depots, while trucks in transit are stopped as they wait for the security conditions to improve to resume activities. As of May 7, the Ports of Buenaventura, Cartagena, and Barranquilla are open for import and export, but the availability of trucks remains an ongoing complication to the resumption of normal operations. Operations at each of the ports are subject to change based on the daily situation. The principal road between the Cartagena Free Zone and the Port Terminal remains closed. Sources also report that the principal roads from the ports to the cities of Bogota, Medellin, and Cali remain closed, so inland haulage remains suspended due to the security concerns of taking alternative routes. Delays are likely to continue for any movements to and from the ports. In previous days, blockades have been reported on the Buga-Buenaventura road as well as on the La Delfina sector. The Port of Buenaventura handles 67 percent of imports and exports into the country.

The continuous blockades have also caused food shortages in the town of La Delfina and the wider region of Cali and have paralyzed coffee exports. There has been no movement of coffee to Colombian ports due to barricades as well as acts of vandalism and looting in the cities. Additionally, cargo delays at the Port of Buenaventura were exacerbated as truckers joined the protest. The barricades mainly affect growers in the departments of Huila, Valle del Cauca, Cauca, and Nariño. Exports have been halted for several days consecutively, though the capacity for storage has not reached its limit.  As of May 7, the government has negotiated transport passage for food and medical supplies on the ninth day of protests across the country.

Air freight shipments and Alfonso Bonilla Aragón International Airport impacted

As of May 6, the ongoing, nationwide protests started to impact air transport. Air freight shipments have been impacted at airports across Colombia. Inbound and outbound movements remain operational at the main airports; however, customs facilities will only operate until 12:00 local time each day. Additionally, pick-up and delivery services by international and local carriers are likely to be disrupted, causing further delays to air freight shipments. On May 3, operations at the Alfonso Bonilla Aragón International Airport in Palmira were restricted starting at 17:00 local time. Airport authorities said the road blockades affected arrivals and departures at the air terminal and prevented airport personnel from entering the terminal premises. Flights were diverted to Medellin International Airport. The airport was reopened to traffic on May 4.

Protests are likely to continue until at least mid-May and major road blockages are expected to persist. Those with operations in Colombia are advised to consider the following recommendations to mitigate supply chain disruptions in the country.

Recommendations

  • Monitor updates on protests: Although the protests have recently been more concentrated in Cali and Bogota, the demonstrations are sporadic and are likely to reignite in other major cities. Given the unpredictable nature, companies should remain informed of any intermittent changes to critical roadway blockades that might impact their business operations. Everstream Analytics will continue to monitor such updates and report on any changes in near real-time.
  • Identify alternative ports of call for ocean freight: Operations at the Port of Buenaventura are normalizing; however, roads leading to and from the port continue to face disruptions due to sporadic blockades. Those utilizing the Port of Buenaventura should consider identifying alternative ports of call for time-sensitive ocean freight deliveries.
  • Anticipate disruptions following changes to economic policy: Much of the civil unrest in Colombia has been triggered by the changes to economic policy regarding cuts to social programs, austerity measures, or price increases on services and taxes. Disruptions are expected to continue so long as concessions are not made by the government. Everstream Analytics will continue to monitor any policy modifications made by the Colombian government in response to the ongoing civil unrest.

Sources

https://www.aljazeera.com/news/2019/11/26/colombia-protests-what-prompted-them-and-where-are-they-headed

https://www.npr.org/2021/04/30/992142575/protesters-march-in-colombia-against-plan-to-raise-taxes-in-pandemic-wracked-eco

https://www.eje21.com.co/2021/05/operacion-restringida-en-aeropuerto-de-cali-por-las-protestas-en-colombia/

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