Petro’s emergency order has been put on hold while the constitutional court examines its legality further. What does this mean for your pocket and the country’s future?
For the first time in Colombian history, the constitutional court on Thursday overruled a presidential order and temporarily negated Gustavo Petro’s declaration of an economic emergency. He had done that in order to get his budget through, essentially bypassing the need to get it through parliament. That’s now been put on hold.
The decree hasn’t actually been struck down, just paused while the court makes a decision on the constitutionality of the order. This means weeks of uncertainty while they deliberate. The decision was taken 6-2 with two abstentions, meaning that there’s a clear majority in favour of negation at this point.
Petro’s declaration of economic, social and ecological emergency was known officially as Decreto 1390 of 22 December 2025. No measures deriving from the decree can be implemented yet, although it will stay formally on the books for now, until the final decision is taken on whether it can stand.
Predictably, he’s reacted furiously to the news, saying that the public should decide. He claims it’s a political decision aimed at protecting the establishment and countering his progressive aims. Furthermore, he says that the court has not properly studied the executive’s arguments.
Even more provocatively, he’s presenting this as a rupture of constitutional order. This should not be taken lightly: he’s essentially arguing for fewer checks and balances on the presidential office. This is a common theme in caudillo politics and one that many in Latin America will recognise.
The large increase in the minimum salary is being dragged into the argument in what appears to be an attempt to win support for the president’s emergency measures. The latter is a dry matter that few take interest in and the former is something that everyone can see and many support.
While there is little to no chance of the minimum salary increase being revoked, it does stir emotions more effectively than a constitutional affair that many take no interest in. He’s also making the argument that this is class war and the working people should not have to bear the cost of the deficit.
His controversial sidekick Armando Benedetti, currently Interior Minister after a string of previous positions has also come out swinging, saying that the court does not have the right to overrule the head of state and that they are protecting the megarich.
While the ruling by the Corte Constitucional is unprecedented, it was not a big shock. Petro was quite clearly playing politics with the decree and is now dealing with the consequences. It was seen in December as an unusual and authoritarian move which had a good chance of being denied. A freeze was always likely, with full rejection absolutely possible.
The court justified its decision by arguing that the financial problems the country has are not exceptional circumstances that demand emergency measures, such as COVID-19 or a natural disaster. Rather, they are structural problems that require a regular solution.
More tellingly, the tribunal noted that the motivation behind the decree was not clearly defined and likely political. It went on to point out formal irregularities and problems with the legal design of the decree.
There had been significant pushback from elected officials to the plan, with 17 departmental governors refusing to implement decree 1474, a follow-on from the economic emergency decree, claiming it was potentially unconstitutional and that this would put them at financial risk if it failed.
This opens serious questions as to the limits on the president’s power, the position of the constitutional court and the viability of future tax reforms. It also sets the clock ticking for a decision, as the Senate and House elections are coming up fast, on March 8th. If this matter is not resolved by the time presidential elections are happening, things will get complicated.
So what does it mean for my pocket?
In the short term, all the planned tax hikes are frozen. That means there likely won’t be price drops, just that some things that were set to rise significantly won’t do so. In fact, as inflation remains high, expect plenty of sticker shock anyway.
Full-rate IVA (VAT or sales tax) was due to go onto liquor and wine, so it’s good news for rum drinkers, winos and aguardiente fans. Gamblers, too, have a reprieve as there will also be no IVA increase for online betting. Finally, smokers won’t see extra taxes on tobacco consumption.
The wealth tax will stay where it is for now, with the bar remaining at COP$3.6bn and progressive rates not coming into play. However, those in debt with local tax revenue authority DIAN will not see a reduction in either interest payments or penalties for late payment.
Elsewhere in the economy, the bankers have avoided a 15% extra supertax and there will be no new charges levied on natural resource extraction. The latter were in any case only designed to be temporary.
It’s technically possible, but very unlikely, that monies already gathered will be returned. The corte constitucional has traditionally avoided retroactive economic decisions, preferring to rule in favour of protecting the state’s finances. That means some COP$800bn that has been collected will stay in limbo for now but almost certainly be unfrozen whatever happens.
What happens next?
Immediately, political and economic uncertainty, as this is only a temporary suspension to revise the legal position. That means weeks more of companies not knowing where they stand for the medium term and politicians taking the opportunity to grandstand and indulge themselves.
There are two paths from here: either the court decides that the economic emergency declaration was valid, in which case we simply revert to the original measures set out in the decree, or it is struck down and everything is up in the air.
Petro is correct when he points out that this will mean he has to borrow more to finance the running of the state, which will increase the national debt. The deficit also still stands and continues to grow, meaning in turn so does the debt. This is long-term unsustainable.
Somewhere down the line, a Colombian president will have to do something to address the deficit the country has been running for years since the collapse of the natural resource boom. However, Duque’s attempt to reform the tax system was met with massive protests and Petro has fared no better while also increasing spending.
There are no signs that any of the candidates in this year’s election are likely to fare any better. Expect to see plenty of grandiose plans and vague suggestions but little fine detail in any manifestos. Quite simply, running on a platform of promising to increase taxation is a death knoll for any candidate.
All of the measures that could be taken are politically poisonous. Cutting spending is hard to do once people have become accustomed to it, stealth taxes abound and business rates are already high. A more progressive income taxation system would need to involve widening the tax base, which will mean more voters paying tax for the first time.
For many regular folk, just keeping their head above water is already hard enough without extra costs suddenly appearing. They won’t vote for more taxes, or even any taxes, as many are simply not taxed directly. At the same time, without significant natural resources popping up, the only way out of the middle-income trap is tax reform.
There’s also the question of the role played by the constitutional court. While nominally independent, it is supported or decried by all sides of the political spectrum depending on who it’s perceived to favour at any one point. There are already calls to ignore it in the name of the ‘people’s will’, conveniently undefined. Expect those to grow in number.
Where will Colombia go in the short term? Probably nowhere, as kicking the can down the road is still possible for a few years more. It’s likely that state spending will slow down, minor budgetary changes will get through and the country will muddle along.
Having already lost investment grade status after Duque’s botched reform, the country hasn’t much to lose for now. There are also promising economic signs, meaning that strong GDP growth could alleviate the situation considerably. However, the national debt will be hanging like the sword of Damocles over future presidents.
