The turmoil surrounding Ecopetrol, Colombia's largest company, presents a complex issue for the nation's economic prospects. This giant contributes approximately 12 to 15% of the country's fiscal revenues. Now, a reputation-damaging scandal emerges with the leak of a costly external audit, commissioned without board consent, to assess the judicial troubles of former CEO Ricardo Roa and their effects on the company’s performance.

Over the last five years, Ecopetrol’s stock, primarily government-held, has plummeted by 19%. This loss is labeled as "dramatic" by Andrés Giraldo, an economist at Universidad Javeriana. He states, “It reflects the market's interpretation of President Petro’s words. There’s a disregard for corporate governance. The OECD has alerted countries like Colombia to uphold the independence of such public enterprises.” He notes that the president met with the board on Wednesday afternoon, hinting, “If the state leader disrespects governance norms, it reverberates.”

Juan Carlos Echeverry, former Ecopetrol president, argues that the current scandal is minor compared to the damage from deteriorating human capital. “The quality of decisions is being undermined, risking future major ventures. The impact will be felt in about five years, when current leaders are no longer present.” He cites the company’s decision against joining the Permian Basin (Texas) exploitation deal with Oxy, known as Oslo, “akin to missing a penalty in a World Cup final, forfeiting a contract contributing 60,000 barrels daily and 200 million in reserves.”

The situation ties into the government's decarbonization policies. Since taking office in August 2022, Gustavo Petro has consistently criticized fossil fuels. He suspended new exploration and exploitation contracts, asserting that, despite Colombia's minimal carbon footprint, immediate detachment from oil dependence is necessary. However, he hasn’t clarified plans to replace a business representing 39% of total exports. Observers reiterate, the president hasn’t yet explained how to substitute one of the nation’s golden eggs of the past decades.

Fiscal challenges, with a looming deficit, haven’t swayed experts advocating a gradual energy transition. “Public finances will suffer more. If Ecopetrol falters, the Colombian state suffers. I suspect the market had already discounted the oil company’s management situation. Now, we’ll see macroeconomic impacts. Notably, the Ministry of Finance announced Thursday that tax withholding for 2026 will apply from June 1, affecting Ecopetrol’s cash issues,” Giraldo elaborates.

In his 2023 book Saving Ecopetrol (Planeta), Echeverry forecasted turbulent skies: “Colombia joins other oil-skeptic nations. A country that relied on coffee until the 1960s, then attracted investment with appealing association contracts and made major [oil] discoveries.” The early 21st-century commodity boom significantly boosted Colombia’s economy, with per capita GDP growing 3.1% annually from 2003 to 2014, a record rate. This boom financed social programs and attracted foreign investment.

The first left-wing government in modern Colombia presents an existential dilemma for Ecopetrol. Echeverry notes accusations of alleged co-optation by contractors, unions, and other sectors aren't new. However, friction between longtime employees and newcomers aligned with Petro’s interests, opposing fracking or supporting environmental activism, intensifies uncertainty. The atmosphere, undoubtedly strained, worsens with abrupt key role changes. Sensitive shifts for a giant ranked among Latin America's top 10 most valuable in 2023, according to Brand Finance.

With numerous loose ends in the American external audit scandal still unresolved, the company's trust is at its lowest in years. This situation manifests in various economic performance aspects: “In stock prices, but also in interest rates creditors charge the country. And beware, in Colombia’s Treasury bonds. Yet, Ecopetrol needs frequent rescue,” Echeverry concludes. A task neither easy nor quick to accomplish.