A new analysis released by the Observatorio Fiscal de la Pontificia Universidad Javeriana reveals that Colombian municipalities remain heavily dependent on the central government for funding, with 50% of their total income derived from national transfers. The report highlights a significant lack of fiscal autonomy, particularly among smaller municipalities, and points to structural disparities in local revenue generation for the year 2024.
According to the data presented by the university, total territorial income in Colombia reached $197.5 trillion COP in 2024. Of this aggregate figure, municipalities accounted for $146.5 trillion COP, while departments received $51 trillion COP.
The breakdown of these municipal funds indicates that transfers from the nation were the primary source of liquidity, totaling $72.8 trillion COP. Own-source revenue (resources generated locally) amounted to $49.6 trillion COP (34%), while capital resources contributed $24.1 trillion COP (16%). The observatory notes that this structure demonstrates a high dependence on conditioned resources, which limits the ability of local governments to make independent fiscal decisions.
Disparities in Local Revenue Generation
The report emphasizes that fiscal autonomy is directly linked to the generation of own resources, which totaled $49.6 trillion COP for the period. Of this amount, 86% corresponded to tax revenues and 14% to non-tax revenues. However, the distribution of these funds is highly uneven across the country’s 1,103 municipalities.
Only municipalities classified as “Special Category”—typically major urban centers—finance more than half of their budgets through own resources. In contrast, municipalities in categories four through six, which often represent smaller or rural towns, generate only 15% to 20% of their funding locally. The Pontificia Universidad Javeriana researchers attribute this gap to differences in economic and administrative capacities between regions.
Taxation and Structural Challenges
In terms of tax revenue, municipalities collected $42.7 trillion COP in 2024. The Industry and Commerce Tax (ICA) was the largest contributor, generating $17.2 trillion COP (40% of tax revenue), followed by the Property Tax (Predial) at $12.4 trillion COP (29%).
While these two taxes are the primary revenue drivers for larger cities, their weight diminishes significantly in smaller municipalities. In these areas, local governments rely more heavily on gasoline surcharges and “estampillas” (fiscal stamps), which can sometimes constitute the primary source of tax income. The observatory warns that outdated cadastral (property) valuations and the heterogeneity of the ICA tax structure continue to limit the efficiency of the territorial tax system.
Non-tax revenues, such as fines, fees, contributions, and the sale of goods and services, totaled $6.9 trillion COP. These sources are particularly critical for category four through six municipalities, helping to offset weaker tax collection capabilities.
Dependence on the General System of Participations (SGP)
The report provides detailed statistics on the extent of reliance on the General System of Participations (SGP), the main mechanism for national transfers. In 2024, the SGP contributed $46.1 trillion COP, representing 63% of all national transfers.
The level of dependence is widespread:
In 695 municipalities, the SGP represents at least 40% of total income.
In 332 municipalities, it represents 50% of total income.
In 95 municipalities, it accounts for more than 60% of total income.
While recent reforms to the SGP are expected to increase these resource flows, the observatory states that the positive impact will depend on improved management capacity and the avoidance of budget under-execution in smaller jurisdictions.
Capital Resources and Budget Execution
A key concern raised in the report is the composition of capital resources, which reached $24.1 trillion COP. These funds are dominated by “recursos del balance”—unexecuted balances from previous fiscal years—which represent 55% of the total capital resources. The high prevalence of these rollover funds suggests a low capacity for budget execution in a large portion of Colombian municipalities.
The Observatorio Fiscal concludes that the combination of high transfer dependence, weak local revenue generation, limited credit access, and low budget execution restricts local autonomy and deepens economic gaps between municipalities. The organization suggests that strengthening tax collection and administrative capabilities are essential steps toward effective fiscal decentralization.
As the year winds to an end, the Bogotá Post looks back at 2025 in Colombia
2025 might well be looked back upon in years to come as the calm before the storm. An early sign of the potentially troubled waters ahead was the assassination of Senator Miguel Uribe in early June. Other themes included friction with the US, political deadlock and a sense that much is being put off for next year.
Colombia still welcomes the world, but maybe not the US president. Photo: Emma Whitaker-Pitts
Relations with the USA started badly after Trump was sworn in, as he deported Colombian immigrants in chains on military planes. Petro at first refused to receive the flights, before relenting and allowing them to land but greeting the travellers and treating them with dignity.
From there it got worse, with Petro turning up on the New York streets protesting while on a visit to the UN. Trump in turn has no love for Petro, calling him a bad guy and putting him and his family on the Clinton List, alongside highly controversial longtime advisor Armando Benedetti. It also emerged at that point that Petro had separated from Veronica Alcocer some time ago.
After the US started bombing alleged narco ships in international waters in the Caribbean, things took an even darker turn. Petro, like most world leaders, was highly critical of US operations in the Caribbean, leading Trump to warn that “he could be next”.
Bogotá herself kept on with business as usual, although that’s not always a good sign. Mayor Gálan has little to show at the mid point of his time in the Palacio Liévano. Crime and rubbish are the most visible signs of a city that sometimes feels stuck in place, although the Metro seems to be on track.
Away from the febrile world of Colombian politics, there was plenty going on in cultural fields, from an impressive Copa América run by the superpoderosas to possibly the best festival Cordillera yet in Bogotá.
Violence mars the start of 2026 campaigning
Senator Miguel Uribe was assassinated at the start of his electoral bid in a worrrying reminder of what can happen in Colombian politics. The politician was shot a number of times in the head while making a visit to Modelia and put into intensive care for a month before passing.
Miguel Uribe giving a speech
One shooter, just 15 years of age was shot and captured at the scene by Uribe’s protection. Other suspects and accomplices were relatively quickly captured, although the intellectual author of the crime remains unclear. While social networks have been hothouses of rumours and propaganda, candidates have thankfully so far stayed largely clear of commenting.
Runners and riders for the presidency have emerged and started the process of thinning the field. The Liberales, Conservadores and Cambio Radical are yet to declare their representatives. However, there are still six candidates for political parties and another 14 who have acquired the requisite 635,000 signatures to run as independents.
Among the latter names there are some big names such as Claudia López, Luis Murillo, Abelardo de Espriella and Vicky Dávila. There’s also a number of seeming no-hopers, but remember that was Rodolfo Hérnandez this time last year and he got to the second round as a semi-protest candidate.
Iván Cepeda is Petro’s successor candidate for Pacto Historico, while the Centro Democrático have plumped for Paloma Valencia. Sergio Fajardo is back in the race again, for Dignidad y Compromiso. That means no place for some high profile heavyweights such as Maria Fernanda Cabal, Susana Muhamed and Gustavo Bolívar.
High-profile roadblocks, change by the back door
One of the constants in Colombian politics in 2025 was that major reforms and were blocked and delayed, yet a few things were snuck in through alternative measures. This was exemplified by Petro declaring economic emergency in a constitutionally dubious manner.
The reforma de salud was sunk again in the springtime, but by mid-year MinSalud had gone ahead with some of the changes anyway. This may well be reversed by an incoming government next year, meaning that EPSs remain somewhat in limbo.
Cómo así que no hay que castigar alcohol cuando más se tiene alcohol en la mercancía, ¿no sabe que es la droga que más produce muerte y daños en los sistemas presupuestales de salud? Menos alcohol en las personas y la sociedad es productivo y beneficioso para la vida. Aquí no se… https://t.co/GFbT4Wx0k5
Major budget changes are unlikely to get through under anyone, so failing to get this done can’t really be laid at Petro’s door. However, he’s gone ahead with what he can do: enormous hikes in the minimum salary, IVA abolished on certain items, demanding that pension funds divest from foreign investments and repatriate their savings.
Paz Total is looking more and more like Fracaso Total as time ticks on. At best, talks with various groups are going nowhere, while other talks have essentially collapsed. Trump declaring the Gaitanistas a terrorist group has muddied the waters even further. The ELN, Colombia’s largest remaining guerilla force, in particular have intensified operations.
While some of that has underlined the difference between their rhetoric and reality, with December’s paro nacional affecting little of the country, other attacks have been bloody and worrying, with the increased use of drones a dangerous direction of travel.
Economic uncertainty?
Whether the economy is doing well or not and whether that is because or in spite of the government will depend mainly on your fellings towards Petro. It’s a mixed bag with plenty of caveats on both sides. GDP growth has been good and ahead of expectation, with unemployment continuing to fall and inflation slowing. Those new jobs are largely formal, too.
However, the GDP growth isn’t as fast as it could be, while it’s outperforming regionally, it’s behind the global average. Unemployment is at a low point for the century, but is still mainly informal and the rate of decrease is slowing. It’s hard to guess how the recently announced minimum wage hike to COP$2,000,000 will affect this.
The minimum salary has reached a symbolic COP$2,000,000
Much more worrying is that much of this may be built on sand. While Petro has struggled to get big-ticket bills through the legislature, he’s quietly done things behind the scenes that have ramped up public spending. He’s betting on that being an investment which will keep delivering in the long run. If not, it will be an albatross for future governments.
Inflation remains at 5.3% annually, not calamitous, but stubbornly high. The cost of living, too, is ever-increasing, not helped by uncertainty in global trade routes. Despite all that wind and bluster between Trump and Petro, tariffs remain at the standard 10% for the time being.
Petro finally got his reforma laboral over the line, in some ways a major achievement considering the opposition it faced in the Senate. However, the text of the bill is somewhat underwhelming. For the main part, there are minor changes such as a cap on overtime and night shifts starting two hours earlier as well as solidifying full time contracts as the norm.
The most substantial change is a commitment to make online providers such as Rappi pay social security and workplace risk contributions for their workers. This may find the devil is in the details in terms of bringing it into reality.
Colombia also brought the Bre-B system of instant payments online. This is already having a huge impact in a country where digital payments are widespread and popular. Long term, this provides a base for increasing transparancy and reducing corruption. However, questions remain over the infrastructure underpinning these systems.
Transport no longer stuck in a jam
The Metro columns are popping up along the Caracas
The really big local news has been that the Metro is progressing as planned. This might not seem like big news, but given how long the project spent in planning and the tendency of the president to stick his beak in, it’s just good to see something being done.
The first trains have arrived in the country and are running tests while the towering columns of the track are in place all over the city. Today, that means pain as Transmi stations close and traffic is rerouted, but all is in place for a fully integrated public transport system in the future.
RegioTram is also more or less on schedule, although it will need to be reworked to connect with the Bogotá systems, after it was pointed out that the planned stations are a fair distance away from the trnasmi and Metro. Regardless, connecting satellite towns with the capital is a gamechanging proposal.
Life in the city remains irritating due to continued high crime levels and the seeming refusal of Carlos Fernando Galán to do anything about rubbish on the streets. The best that can be said about Gálan at this point is that he has done little of note, hardly a glowing resumé, given his ambitions coming into office.
Culture vultures
Festival Cordillera is now intertwined with la nevera
The capital saw a celebration of Latino music as Festival Cordillera 2025 confirmed the event’s stature as a lodestone of music in Colombia. With Festival Estéreo Picnic 2025 providing a balance that focuses on anglophone music, the capital is well set. However, with both those festivals in the Parque Bolívar, Rock al Parque is struggling to stay relevant.
Plenty of other bands were touring throughout the year too, with Bogotá increasingly on the map for big-name world superstars. That means enduring the likes of Guns N’ Roses, but also means that rolos can see contemporary stars like Dua Lipa.
Former busker Ed Sheeran popped up on stage as a surprise guest of J Balvin in December, while another Brit unsurprisingly failed to turn up because that’s what Morrissey does these days. Latinos across Instagram responded by trolling the famous vegetarian with meat recipes.
Elsewhere online, Colombian food performed well on a host of dubious internet polls, sparkign waves of reposted joy throughout the year. In more dispiriting news, Club Colombia Negra was discontinued by Bavaria, meaning you have few chances to neck the country’s last widely available dark lager.
For those more interested in staying home, Colombia’s first ever board games convention took place in November. Ludotopia was an undisputed success, attracting the likes of Wingspan artist Ana Maria Martínez (who teased the upcoming expansion for Wingspan South America, Central America and Caribbean) and proving that Bogotá retains a dynamic and evolving cultural scene.
Colombia fall just short again
The women’s football team came into the Copa América on good form and were within seconds of taking the title. With two minutes of regular time to go, Mayra Ramírez put Colombia ahead for the third and seemingly last time at 3:2. Brazilian superstar supersub Marta, in her last tournament, broke Colombian hearts as she rolled back the years with a last gasp equalizer in the sixth minute of injury time.
The drama wasn’t over, as she then put Brazil in front for the first time in extra time before Leicy Santos equalized and took the game to penalties. There, the game slipped through the fingers of the superpoderosas as perma-champions Brazil showed their experience. They took the shoot out 5:4 for their 9th title in ten Copa Américas.
The men’s team, also runners up in their Copa América, ground their way to qualification for next year’s World Cup in North America. Conmebol was a slogfest this time around, with everyone except Argentina involved in taking points off each other and goals in short supply.
Eventually, Colombia found form, only losing a single game in the year and finishing with a goalfest against Venezuela, beating their fierce rivals 6-3 in the last game. That leaves Colombia 13th in the FIFA rankings – unlucky for some maybe, but not coach Nestor Lorenzo.
Santa Fe had a sweet victory over Millos en route to the first title
On the local stage, Santa Fe reclaimed the liga apertura for Bogotá, triumphing in Medellín over Independiente thanks to an inspired performance from Wigan legend Hugo Rodellega. Knocking out Millos and El Tigre Falcao on the way made it even sweeter. Junior of Barranquilla took the finalizácion, with Nacional winning the Copa Colombia. The latter was a Medellín derby and marred by a pitch invasion and violence at the end.
Cricket Colombia hit a six as MinDeportes officially recognised the gentleman’s game as a sport in the country. This opens up the field for more funding and support for events. They also welcomed a visiting team from Trinidad and Tobago as well as setting a T20 record for a last wicket chase in the Gulf Series against México.
What’s coming next?
Next year promises much more drama in Colombia, with national elections set to be hard-fought. This is an unusual cycle, as the country is preparing to see who will succeed a leftist president. Whether there will be continuity, a sharp tack rightwards or a drive for the centre is still anyone’s guess.
The lineups for the capital’s big music festivals seem strong, with a supporting cast of superstars also set to tour. The men’s football team have a relatively straightforward group in the World Cup and will fancy themselves to do well.
Our predictions for 2026 will be coming in the next few days, but whatever comes to pass, we’ll be here to keep you in the loop with what’s happening in Colombia and why. We got some of the 2025 calls right, after all. right Happy new year from the Bogotá Post – your English voice in Colombia!
An extraordinary leap of 23.78% in the Colombian minimum salary per month brings it to a symbolic COP$2,000,000
More money in many wallets with the Colombian minimum salary 2026
An unprecedented hike in the Colombian minimum salary for 2026 was announced on Monday 29 December, bringing the rate to two million pesos per month. That represents an increase of 23.78% on the 2025 number. That’s the biggest jump ever – only 1997 comes close in recent years with 21.02%.
The minimum salary itself (SMMLV or Salario Mínimo Mensual Legal Vigente) has gone up to COP$1,750,905. There is also a transport subsidy (COP$249,095) which brings the effective minimum salary in Colombia for 2026 to two million on the nose.
Business leaders had suggested a rise of around 7.21%, keeping it above annual inflation (5.3% as of November), while trade unions and syndicates had called for an optimistic 16%. Both were left in the dust by Petro’s extraordinary decision.
The extraordinary rise is not due directly to inflation, nor to the rising cost of living, but represents a fundamental change in the rationale behind the number. Colombian president Gustavo Petro explained that the minimum salary should be considered a household income, not individual. He calls this salario vital, or salario digno.
Whether the household basis for the minimum salary holds up to scrutiny is hard to say. It certainly was the case, but like most other middle-income countries Colombia is rapidly changing. The idea of a single income supporting a family is less true every year, with Colombian households under 3.5 people on average and with 1.5 workers. That means a true dependency ratio of nearly one to one.
It was calculated by working around the price of a basket of goods for the average family (canasta básica), logged at nearly 3 million pesos for four people. Using that number of 1.5 workers gave the convenient round number of two million.
The minimum salary (not including the transport subsidy) is the baseline number that in turn influences a whole lot of other values in Colombia, such as fines and public salaries which are counted as multiples of the SMMLV. That includes, happily for Congress, politicians’ pay.
What does the increase in the Colombian minimum salary mean for the economy?
Far harder to work out is the long term impact of this rise in the Colombian minimum salary. Petro claims it will further stoke private spending in the country as the increased wages percolate throughout the economy and allow continued growth.
It will increase labour costs for a number of businesses, especially small companies, some of which will struggle to keep their heads above water with such a sudden rise in payroll. For medium and larger size businesses, this includes mandatory SENA apprentices.
Note that payroll costs for employers will increase by more than the 23.78% headline figure, as they have to make social security payments based on an employee’s wage as well as the wage itself.
Massive firms who are liquid enough to be able to absorb costs will likely be absolutely fine, even if there are a couple of high-profile exceptions. Companies that are dodging the system, either through informal working or false self-employment, will also likely thrive.
Of course, the new reforma laboral promises to regularise and/or eliminate such practices. On paper, that is. In reality, these are the potential counterintuitive effects that could be the legacy of this increase in the Colombian minimum salary.
Colombia saw a sharp downtick in the number of employees on minimum salary this year, while informal work and self-employment has risen to around 55% of the workforce. This trend could continue much more rapidly with companies unwilling to pay the high new Colombian minimum salary.
A further issue is how close the minimum salary is now to the average. This will particularly affect smaller businesses and recent graduates. The former will find it hard to offer salaries that are significantly above minimum to attract quality employees, while the latter will find themselves often close to minimum salary and waiting longer for a return on their studies.
It is worth remembering that both minimum salaries themselves and increases to them are often bitterly opposed the world over and predictions of chaos are frequently sown. In most cases there is short term turbulence followed by long term stability.
Is this a political power play?
Despite Petro’s official line about household incomes, many will see this as a nakedly political move ahead of next year’s elections. It certainly will play well among the Colombia Humana base and potential voters as a reason to keep faith with the left and cast their vote accordingly next year.
A more charitable view would be to say that it’s one of the last significant acts that Petro can take before leaving office, so he’s gone big to deliver an achievement. Those have been in short supply over his time in the Palacio Nariño.
What’s undoubtable is that this creates a massive headache for next year. Regardless of who takes power, they won’t be expected to deliver quite such a large rise. However, they will have to be careful how far they go below it.
Any successor to Petro will at least be able to say their allies prepared the ground and maybe get away with a modest increase. An incoming fiscal conservative will be under pressure to deliver another big increase against their natural instincts and take heat for not doing so, while actually cutting the rate would be close to political suicide.
While a lot of candidates in the 2026 election might say that this was a fiscally imprudent move, they will have to be careful how far they push it. Many in Colombia will agree with them, but those same people are also likely benefiting from the increase.
There are also the optics of a rich politician arguing against the very many voters who are on minimum wage or even those who aspire to earn minimum wage. It’s not a good look to argue against giving stuff to the people whose vote you want.
Short term gains, but long term problems?
So in the end this is a huge play from Petro, which has won him a useful political victory for today. It backs up his rhetoric, as he can easily claim he’s acting on behalf of the workers. There’s plenty of truth in that, as many Colombians work on minimum wage.
It may be a bribe to the electorate, but many will claim that no one else has at least offered them anything like this ever before, so good on him. Going into the 2026 election candidates on Petro’s side will be able to point to this achievement, while opposition candidates face pressure to offer at least something similar or be painted as rich folk denying the poor.
It’s hard to see a short term in which we won’t see a lot of businesses go bankrupt. The longer term is harder to read, as most companies will be unhappy but able to keep going. The effect on public salaries is potentially alarming with the state already running a deficit, unable to achieve fiscal reform and still expanding.
Ironically, it’s entirely possible that the increase in the Colombian minimum salary for 2026 might lead to more informality and less dynamism in the economy. However, it’s also completely believable that the economy is resilient enough to handle it with ease. This may be Petro’s biggest gamble yet and even he doesn’t know how it’ll play out.
Colombian President Gustavo Petro on Monday decreed a 23.7% increase in the country’s minimum wage for 2026, the largest real rise in at least two decades, bypassing negotiations with unions and business groups and sparking warnings from economists, bankers and employers over inflation, job losses and rising informality.
The decree lifts the monthly minimum wage to 1.75 million pesos (U.S$470), or close to 2 million pesos including transport subsidies, and will apply to roughly 2.5 million workers when it takes effect next year. Petro said the measure aims to reduce inequality and move Colombia toward a “living minimum wage” that allows workers to “live better.”
But business associations, financial analysts and opposition lawmakers said the scale of the increase — far above inflation and productivity trends — risks destabilising the labour market and the broader economy.
According to calculations based on official data, with inflation expected to close 2025 at around 5.3% and labour productivity growth estimated at 0.9%, a technically grounded adjustment would have been close to 6.2%. The gap between that benchmark and the decreed hike exceeds 17 percentage points, the largest deviation on record.
Informality and job losses
Colombia’s minimum wage plays an outsized role in the economy, serving not only as the legal wage floor but also as a reference for pensions, social security contributions and public-sector pay.
Banking association Asobancaria warned that increases far above productivity can generate unintended effects. Citing data from the national statistics agency DANE, the group noted that 49% of employed Colombians — about 11.4 million people — earn less than the minimum wage, mostly in the informal economy, while only 10% earn exactly the minimum wage. Former director of DANE and economist Juan Daniel Oviedo believes that an increase that only benefits one-out-of-ten workers will stump job creation. “A minimum wage of 2 million pesos will make us move like turtles when it comes to creating formal jobs — something we need to structurally address poverty in Colombia.”
Retail association FENALCO described the decision as “populist” and said the talks had been a “charade.” Its president, Jaime Alberto Cabal, said the process ignored technical, economic and productivity variables and would hit small businesses hardest.
Lawmakers also raised concerns about the impact on independent workers and contractors in the agricultural sectors, especially hired-help on coffee planations. Carlos Fernando Motoa, a senator from the opposition Cambio Radical party, said the decision would push vulnerable workers out of the formal system.
“The unintended effects of this improvised handling of the minimum wage will end up hitting independent workers’ pockets,” Motoa said. “Many will be forced to choose between eating or paying for health and pension contributions.”
Economists warned that micro, small and medium-sized enterprises — which account for the majority of employment — may respond by cutting staff, reducing hours or shifting workers into informal arrangements to cope with higher payroll and social security costs.
Inflation and rates at risk
Analysts also cautioned that the wage hike could reignite inflation, complicating the central bank’s easing cycle. Central bank economists have forecast 2026 inflation at 3.6%, down from 5.1% expected in 2025, but several analysts said those projections may now need revising.
In an interview with Reuters, David Cubides, chief economist at Banco de Occidente, called the increase “absolutely unsustainable,” warning it would affect government payrolls, pension liabilities and the informal labour market.
“Inflation forecasts will have to be revised,” Cubides said, adding that interest rates could rise again in the medium term as a result.
The impact is amplified by Colombia’s ongoing reduction in the legal workweek. From July 2026, the standard workweek will fall to 42 hours, meaning the hourly minimum wage will rise by roughly 28.5%, further increasing labour costs.
The decree comes six months before the presidential election on May 31, 2026, and is viewed by critics of Colombia’s first leftist administration as an electoral gamble aimed at shoring up support for the ruling coalition’s candidate, Senator Iván Cepeda.
Opposition senator Esteban Quintero, from the Democratic Center party, warned that Colombia risked repeating the mistakes of other Latin American countries that pursued aggressive wage policies.
“Careful, Colombia. We cannot repeat the history of our neighbours,” Quintero said. “Populism is celebrated at first — and later the costs become unbearable.”
Former finance minister and presidential hopeful Mauricio Cárdenas said the decision would inevitably lead to layoffs, particularly in small businesses already operating on thin margins, and described the policy as “economic populism” whose costs would materialise after the election cycle.
“The employer ends up saying, ‘I can’t sustain this payroll,’” Cárdenas said. “People are laid off, and many end up working for less than the minimum wage. In the end, nothing is achieved.”
Liberal Party senator Mauricio Gómez Amín said the increase risked becoming a political banner rather than a technical policy tool.
“Without technical backing, a 23% increase translates into inflation, bankruptcies and fewer job opportunities,” Gómez Amín said. “Economic populism always sends the bill later.”
While supporters argue the measure will boost purchasing power at the start of 2026, analysts cautioned that the short-term gains could be offset by higher prices, job losses and a further expansion of Colombia’s informal economy — already one of the largest in Latin America.
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