Societe Generale reviewed Colombia’s presidential election ahead of the 31 May 2026 vote. Polls indicate a likely runoff, with second-round matchups favouring a unified right over the Historic Pact candidate, Gustavo Cepeda.
The note says Paloma Valencia and De la Espriella both perform better than Cepeda in runoff polling scenarios. It adds that fragmentation on the right remains the key risk factor.
Runoff Dynamics And Polling
Support for Valencia is described as rising as undecided voters consolidate around her. Cepeda is described as being close to a ceiling in polling support.
Odds are described as slightly favouring Valencia, while the credibility of polling is affected by a probe by the CNE (Consejo Nacional Electoral). The note also cites elevated institutional and fiscal stress, including tensions involving the central bank and limited fiscal space, which are linked to cautious market behaviour towards Colombian assets.
With the May 31st presidential election approaching, we see significant uncertainty priced into Colombian assets. Polls point toward a runoff, with the market-friendly unified right candidate having a slight edge, but the outcome is far from certain. This tension is creating clear opportunities and risks for derivative traders over the next six weeks.
The increased political risk has pushed implied volatility higher across the board, particularly in options on the USD/COP currency pair. We have seen the peso weaken by over 3% this quarter, trading near 4,100 as investors seek safety. Traders expecting further instability can buy call options on USD/COP, positioning for a sharper depreciation of the peso if the Historic Pact candidate gains momentum.
On the equity side, the COLCAP index has been a notable underperformer in Latin America, down nearly 5% year-to-date while Brazil’s Bovespa is positive. This reflects anxiety over potential fiscal and institutional stress, regardless of the winner. Buying put options on a Colombian stock market ETF can serve as an effective hedge against a negative election surprise.
Rates Credit And Volatility
We remember the run-up to the 2022 election, when from our perspective in 2025, we saw Colombia’s 5-year Credit Default Swaps (CDS) widen significantly as a measure of risk. A similar trend is emerging now, with spreads ticking up by 25 basis points since the start of the year. This indicates that bond traders are already pricing in a higher probability of distress.
The central bank’s difficult position, battling inflation that remains sticky above 5%, gives it little room to support the economy. This backdrop amplifies market sensitivity to political news, suggesting even small shifts in polling could trigger outsized moves. Therefore, simple directional bets are risky, and strategies that profit from price swings, like long straddles, might be more prudent.
