Colombia Court Rejects Referendum on Uribe Third-Term (Update2)

February 26, 2010, 7:58 PM EST

By Helen Murphy and Alexander Cuadros

Feb. 26 (Bloomberg) -- Colombia’s constitutional court ruled against allowing a referendum on permitting presidents to run for three consecutive terms, dashing Alvaro Uribe’s chances of holding office for 12 years.

The court voted 7-to-2 against permitting Colombians to vote on whether to lift the ban on third terms, court President Mauricio Gonzalez told reporters in Bogota. The magistrates rejected the initiative -- which may have let Uribe stand for office in May -- because it endangered institutional checks and balances provided for in the 1991 constitution, Gonzalez said.

“Colombia has a life after Uribe,” said Patrick Esteruelas, a Latin America risk adviser to hedge funds at the Eurasia Group in New York. “Investors associate the Colombia security and economic miracle with Uribe. There’s a deep bench of candidates waiting in the wings willing to continue the very same policies.”

Today’s decision opens the way for former Defense Minister Juan Manuel Santos to stand for president with Uribe’s backing. Former Medellin Mayor Sergio Fajardo, former Senator German Vargas Lleras and Senator Gustavo Petro also intend to run. Opposition lawmakers say another four years in office for the popular Uribe would have drawn comparisons to Venezuela’s Hugo Chavez and other regional leaders who have clung to power.

Uribe, who never publicly said whether he wanted to run, spurred the fastest economic growth in 30 years as he curbed violence and pushed back cocaine-funded rebels. Still, his approval fell and he faced nationwide protests this month after reforming the deficit-ridden health system by decree, limiting benefits.

‘Love for Colombia’

“The only feeling I harbor is a love for Colombia,” Uribe said at an event in Barranquilla broadcast on national television after the court ruled against holding the referendum.

Opposition lawmakers say the 57-year-old lawyer isn’t the only president who can run Colombia and fight terrorism.

“This is all about Uribe’s personal ambitions, his cult of personality,” Carlos Gaviria, a former constitutional court president who lost the 2006 presidential election to Uribe, said in a telephone interview. “To risk such a fragile, incipient democracy for his personal gain is outrageous.”

U.S. President Barack Obama, at a White House press brief briefing with Uribe last June, said George Washington’s decision to abandon power set a positive precedent for the U.S.

Second Term

During his second term -- made possible by a constitutional change overturning a one-term limit -- Uribe strengthened his hand in the National Electoral Council, the central bank and the Supreme Court. He also named three of the judges on the nine- member constitutional court.

A third term for Uribe may have made it harder for the U.S. to criticize Chavez, Washington’s fiercest critic in the region, who has twice changed the charter to scrap term limits and gain extra powers. Ecuadorean President Rafael Correa and Bolivia’s Evo Morales also altered their constitutions to stay in office.

Uribe’s policies have won investors’ support, attracting almost $50 billion in foreign direct investment since he took office in August 2002. The economy grew at the fastest pace in three decades in 2007 before sliding into a recession last year.

The IGBC stock index has risen more than nine-fold since he first took office and the peso gained more than 30 percent.

“After all those years of chaos and civil war, all this pent-up investment flowed into the country,” said Neil Shearing, an emerging-markets economist at the London-based research company Capital Economics Ltd.

Market Reaction

Still, investor reaction to Uribe’s retirement would be “muted,” said Alberto Bernal, head of emerging-market research at Bulltick Securities Corp. in Miami.

“The market had been positioning itself for a 60 percent chance the court would rule against holding the referendum,” Bernal said. “Whoever wanted to get out because of the risk Uribe wouldn’t run for a third term already got out.”

Yields on Colombia’s benchmark peso bonds due July 2020 ended at 9.04 percent today compared with 8.92 percent on Feb. 3, after local media revealed a pre-analysis by the court ruled against the referendum. The IGBC index has gained 1.9 percent in the same period, while the peso has gained 2.2 percent.

Developer Gonzalo Ramirez and a group of 99 investors plan to start a $50 million expansion next month of the luxury El Tesoro shopping mall in Medellin, once among the world’s most dangerous cities.

Santos Favored

“We have total confidence in Colombia’s healthy investment environment whoever is president,” said Ramirez, who forecasts sales at the mall to grow as much as 40 percent to $8 million a month.

Santos was favored by 18 percent of voters to 12 percent for Fajardo in a poll taken between Feb. 13 and Feb. 15. by Centro Nacional de Consultoria. The poll of 2,000 Colombians has a margin of error of plus or minus 2.1 percentage points.

While Uribe remains popular, with an approval rating over 60 percent, he has been dogged by controversy in the past two years.

During his second term, the government faced disclosures that the army murdered civilians and passed them off as guerrillas killed in combat. Uribe has also been weakened by accusations the domestic intelligence agency spied on journalists and opposition politicians. Many former allies in congress have been convicted for ties to paramilitary groups.