The political economy of fuel subsidies in Colombia

Abstract

"Colombia has made progress towards eliminating fuel and diesel subsidies and reducing discretionary spaces allowing for artificially low fuel prices, but challenges remain. Colombia has provided explicit and implicit subsidies to gasoline and diesel since 1983, costing the government up to 1.6% of GDP. This paper discusses the political economy of fuel subsidies in the country to understand why reform has been so slow. It focuses on the groups benefitting from the subsidies and their political participation, as well as other economic impacts that have limited the political will to eliminate them. The Colombian case serves as an example of the difficulty of fully eliminating fuel subsidies once they are already established."