A Rocky Road

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Colombia’s lower house of congress approved a pension reform plan proposed by President Gustavo Petro, handing a victory to the leftist leader who has faced fierce opposition from lawmakers over his flagship policies, Reuters reported.

Legislators voted in favor of the bill on June 14 after it was previously approved in the upper house. It is expected to take effect in July 2025.

The government said the changes will strengthen the state pension fund Colpensiones, expand subsidies for elderly Colombians living in poverty, and prevent competition between the public and private pension systems.

The reform also establishes a savings fund managed by the central bank to finance future pension compensation, potentially increasing demand for local peso bonds, according to Bloomberg.

It is one of the many ambitious policies that Petro – Colombia’s first left-wing president – has attempted to pass, but which have faced strong resistance from opposition lawmakers. The president is also pushing for health sector reform and to amend labor laws.

However, business analysts cautioned about the potential impacts Petro’s pension plan could have on capital markets and public finances.

Meanwhile, constitutional scholars told Bloomberg that the reform will be likely killed by the nation’s top court.

Under Colombia’s constitution, bills must be approved within two congressional periods, from July 20 to June 20 of the following year.

Due to delays, the ruling coalition rushed the reform bill through the lower house without debate to meet the deadline.

Some lawmakers claimed the move violated the constitution, with legal observers noting that the bill’s hasty approval without any discussion breached procedural rules.

This could potentially lead to a clash with the constitutional court, which typically takes seven to eight months to rule. Despite the law being set to take effect next year, the court could issue a stay to prevent it from taking effect.