Petro’s 23% Wage Hike Sparks Inflationary Pressures Across Colombia

The Colombian government's implementation of a 23% increase in the national minimum wage, effective January 1, 2026, marks the most significant adjustment since 2009. This policy, championed by President Gustavo Petro as part of his broader social equity agenda, raised the monthly floor from COP 1,187,000 to COP 1,459,000 (approximately USD 315 to USD 313 in purchasing power). The change directly impacts over 9 million formal and informal workers, particularly in sectors like retail, transportation, and domestic services. Economists note that the wage hike, while intended to reduce poverty and boost consumption, has contributed to rising input costs across industries. Data from Colombia’s National Administrative Department of Statistics (DANE) shows core inflation reached 5.8% in January—the highest level since late 2023—driven largely by service sector price increases following the labor cost surge. Small and medium enterprises (SMEs), especially in urban centers like Bogotá and Medellín, are experiencing tighter margins, with some reporting up to a 15% rise in payroll expenses. In response, several companies have either delayed hiring or introduced automation measures. Retail chains such as Éxito and Jumbo have begun testing self-checkout systems in select locations, citing staffing challenges. Meanwhile, public transport operators in Bogotá have proposed a 12% fare increase, pending approval, to offset higher driver wages. The Central Bank of Colombia has signaled cautious monitoring of monetary policy, though no immediate rate change has been announced. Labor unions have broadly welcomed the increase, emphasizing its role in bridging income inequality. However, business groups including Cámara Colombiana de la Construcción and Asobancaria have expressed concern over long-term competitiveness, warning that sustained cost pass-through could erode export margins and deter foreign investment.