Update Country Report Curaçao 23 Mar 2021

Event

In the parliamentary elections held on March 19th, the opposition centre-right Movementu Futuro Korsou (MFK, Movement for the Future of Curaçao), won the largest number of seats and will now form a new government. The MFK's anti-austerity agenda is likely to lead to increased friction with the Netherlands.

Analysis

As per our expectations, the MFK won a resounding victory, taking nine of the 21 parliamentary seats to become the largest single party-up from five seats in the previous elections in 2017. The incumbent centrist Partido Alternativa Real (PAR; Real Alternative Party) of the outgoing prime minister, Eugene Rhuggenaath, won four seats, down from six previously. The PAR's coalition partner, the Partido MAN, lost three seats, acquiring only two in total.

Beyond the MFK, the main electoral winner was the centre-right Partido Nashonal di Pueblo (PNP, National People's Party), which won four seats, up from none previously. The MFK, headed by Gilmar Pisas, has already indicated that it will create a coalition with the PNP in order to form government. Other parties could also join the coalition, although the PAR and Partido MAN are unlikely to do so.

The MFK's electoral success was likely, given deep public frustration with the PAR-Partido MAN government's handling of the coronavirus (Covid-19) pandemic. In particular, the MFK campaigned on a policy platform opposing austerity measures introduced by the Rhuggenaath administration in order to secure financing from the Netherlands. As such, the new MFK-PNP government will try to renegotiate terms with the Dutch to allow for a longer period of loose fiscal policy until tourism inflows recover, as outright reversal of existing austerity measures risks cutting off future financing from the Netherlands. Renegotiations with the Dutch will prove difficult, however, given the MFK's pro-sovereignty and pro-independence stance, which could cause friction in discussions with the Netherlands. While seeking full independence from the Dutch may not be top of the MFK's agenda bearing in mind the country's ongoing economic woes, it is nonetheless a long-term goal that will inform the way the new government negotiates and co-operates with the Netherlands.

Impact on the forecast

An MFK victory was in line with our expectations and thus our forecasts remain unchanged. The MFK's pro-independence stance, however, does raise the risk that additional Dutch financial support fails to come through altogether, which in turn would weigh on the fiscal balance and accentuate macroeconomic risks.