Record interest rates trigger central bank clash for Colombia’s Gustavo Petro. El Salvador approves life sentences for teenagers in constitutional reform.
Ignacio Portes & Jorge C. Carrasco
COLOMBIA
Petro clashes with Colombia’s central bank
The decision by BanRep, Colombia’s central bank, to raise the benchmark interest rate by a striking 100 basis points to 11.25% has sparked a constitutional battle with Gustavo Petro’s government, just weeks before the country’s presidential election.
The majority board decision was driven by inflation that remains stubbornly elevated, hovering above 5.3% and well above the bank’s 3% target, with core inflation also trending higher. BanRep President Leonardo Villar framed the hike as a technical necessity to tame inflation expectations, in line with the bank’s constitutional mandate and autonomy.
The president disagreed, to put it mildly. Never one to shy away from strong rhetoric, Petro said the hike reflected “neoliberal thought … which has led us to the climate crisis that can bring humanity and life on Earth to its end.”
But Petro also grounded his argument in data, pointing to the widening gap between Colombia’s inflation rate and its policy rate, which tripled under his administration compared to previous governments — suggesting that the board has an ideological preference.
Critics of Petro, however, see the situation as largely of his own making. Colombia’s fiscal deficit has deteriorated sharply during his administration, reaching its worst levels in decades over the last two years, excluding the Covid crisis.
The 6.7% deficit recorded in 2024 surpassed those seen during the 2008 global financial crisis and the severe 1999 Colombian crisis. Red ink persisted into 2025, with the deficit narrowing only marginally to -6.4%.
👉 Why it matters. The clash between Petro and BanRep comes as markets are already uneasy about Colombia’s fiscal outlook, with bond yields rising and capital flowing out. Multiple economy ministers have already resigned after clashing with Petro over fiscal spending, and local analysts increasingly view BanRep as the last line of defense for monetary stability.
Petro responded with an unprecedented move, withdrawing the Economy Ministry’s representative from the BanRep board, which he accused of defending “banker interests” at the expense of “choking economic growth and raising the cost of debt for Colombians.”
While the president’s rhetoric resonates with supporters facing expensive credit, economists warn that weakening BanRep’s autonomy could trigger a debt and currency crisis, deepening uncertainty at a time of slower growth and fragile public finances.
Criticism has also come from Petro’s first economy minister, José Antonio Ocampo, who published a letter signed by 300 economists across the country, condemning Petro’s pressure on the Central Bank’s board. This has ranged from launching subsidized loans from his Economy Ministry to saying the monetary authority should be subordinated to the executive branch as the true people’s representative.
According to Alejandro Torres, an economics professor at EAFIT in Medellín and investigator at the Centro de Valor Público, BanRep’s hawkish stance has been a response to government policy.
“We have an independent Central Bank whose objective is centered on price control and the growth of the country. Unlike other Latin American countries, after the pandemic, we haven’t been able to normalize inflation goals,” Torres said. “That reduces trust in our monetary policy. We have suspected that BanRep would find it hard to meet inflationary goals since last year.”
While the latest hike was unusually steep, Torres said BanRep “wanted to send a message with a large increase in interest rates to get ahead of the market.”
CRIME
Life sentence for teens in Bukele’s El Salvador
Nayib Bukele, the region’s most controversial head of state, has taken his tough-on-crime agenda to a new level this week, signing a bill that allows judges in El Salvador to impose life sentences on teenagers convicted of serious crimes.
With Bukele firmly in control after winning 84% of the vote in the country’s last election, El Salvador’s Congress passed a constitutional amendment with overwhelming support, with 57 lawmakers out of a possible 60 voting in favor.
Some of the reform’s biggest changes target adolescents between the ages of 12 and 18, who can now face life behind bars if found guilty of homicide, femicide, rape or affiliation with criminal gangs. Unlike adults, however, minors will be eligible for parole after 25 years.
Before the reform, offenders aged 12 to 16 faced a maximum of 10 years for serious crimes, rising to 15 years for those over 16 and up to 20 years for gang members. Lesser but still serious crimes such as extortion, kidnapping and aggravated robbery will continue to carry sentences of up to 15 years.
👉 Why it matters. Bukele has arguably been the most influential right-wing political figure in the region over the past decade, with many across the continent trying to emulate his iron-fist approach to crime. With emergency powers to fight crime since 2022, the Salvadoran leader has redrawn the boundaries of acceptable human rights practices in his fight against the gangs that long dominated his country.
Bukele has already defied multiple basic principles of modern criminal law, suspending due process, fast-tracking trials, limiting visits for prisoners and restricting their access to legal counsel. With reduced judicial oversight, the risk of wrongful convictions and other false positives has also risen, raising alarms among multiple human rights organizations.
Passing such reforms elsewhere in the region will not be easy, as legal protections for minors are enshrined in many national constitutions, and have expanded since the 1948 Universal Declaration of Human Rights. Still, ideas in this direction are already becoming more popular.
The last campaign in Peru was a good example of this, with outsider comedian Carlos Álvarez arguing that the country should withdraw from the American Convention on Human Rights, which he claims constrains effective crime-fighting.
With the sole exception of Claudia Sheinbaum in Mexico, the leaders with approval ratings above 50% across the continent are all right-wingers, meaning some could eventually gain enough congressional strength to make these changes, though Bukele’s situation remains an exception rather than the rule so far.
QUESTION OF THE WEEK
Nayib Bukele’s paternal family is of Middle Eastern origin. But where exactly did they come from?
- Lebanon
- Israel
- Palestine
- Syria
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