Fuel Price Hike Sparks Tensions Between Government and Various Sectors in Colombia

Fuel Price Hike Sparks Tensions Between Government and Various Sectors in Colombia

Throughout the year 2023, the cost per gallon of gasoline in Colombia has experienced a significant increase, causing notable discomfort among motorists and prompting them to participate in street protests as an expression of their discontent.

As per the Ministry of Finance, Colombia still maintains one of the most competitive gasoline and diesel price structures in Latin America, largely attributable to the operation of the Fuel Price Stabilization Fund (FEPC). This fund has been instrumental in alleviating the inflationary impact stemming from recent rises in oil and its related products’ prices.

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The Impact on Small Businesses and Food Prices

Protestors have been expressing concern that the monthly price hikes are making it increasingly difficult for small businesses to operate. They argue that the rise in fuel costs could push up food prices, causing a chain reaction that could adversely affect the nation’s economy. This is particularly concerning for a country like Colombia, where small businesses form the backbone of the economy and are a major source of employment.

On the other hand, Colombia’s government, led by President Gustavo Petro has explained that the gasoline subsidies, which amount to about $11 billion pesos a year, are a financial burden that the country can ill afford. According to the administration, the subsidies need to be eliminated to clear debts to the national oil company, Ecopetrol, and to free up more funds for social programs. This argument, however, has failed to quell the growing discontent among the populace.

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A Rising Trend: the Price of Gasoline

The price of gasoline in Colombia has seen a significant rise, from 9,000 pesos a gallon in August of last year (approximately USD $2.50) to more than 14,000 currently (USD $3.40). This increase has come as the government cuts back on subsidies each month. Officials in Colombia’s Finance Ministry have stated their intention for gasoline to reach a price of 16,000 pesos per gallon (USD $4) by the end of the year. This would align with current gas prices in the U.S. However, the federal minimum wage in the U.S. is more than four times greater than Colombia’s minimum wage of USD $280 a month, further exacerbating the issue.

The ongoing protests over rising gasoline prices are symptomatic of deeper issues at play. With small businesses struggling to cope with the price hikes, the potential for a knock-on effect on food prices is causing alarm.

Colombian Cabinet Divided Over Diesel Price Amid Public Discontent

Members of President Gustavo Petro’s cabinet are in conflict over the modification of diesel prices in Colombia due to widespread discontent caused by a recent fuel price hike affecting various segments of society.

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Camacho, stated in a radio interview that there are currently no plans to implement diesel price hikes, despite contrary arguments made by Minister of Finance Ricardo Bonilla. The official had suggested raising diesel prices in 2024, potentially up to 15,000 pesos per gallon, to address the deficit in the Fuel Price Stabilization Fund (FEPC). Camacho, however, contradicted this and stated that there are no immediate plans to increase diesel prices, and the matter is still under discussion.

The minister mentioned that the FEPC deficit will be assessed at the end of 2023 in collaboration with the Ministry of Finance to determine the best course of action for the following year. Additionally, the government is engaged in discussions about gasoline price behavior in technical forums, exploring various pricing alternatives for the upcoming months.