(Bloomberg) -- A top Colombian court annulled the appointment of one of the central bank’s directors on the grounds that it violated rules to promote gender equality, a decision that may open the door for the government to eventually name a majority of the board.

In a ruling published Thursday evening, the nation’s Council of State voided the 2021 naming of Alberto Carrasquilla to the bank’s policy committee. Carrasquilla was appointed by then-President Ivan Duque to replace co-director Carolina Soto, who quit when her husband Alejandro Gaviria ran for president. 

Soto’s exit took the number of women co-directors below the 30% lower limit, the court said in its ruling. The court also said its decision can’t be appealed. 

If its ruling stands, President Gustavo Petro would nominate Carrasquilla’s successor. Petro will also get to name another two co-directors half way through his four-year term which started in August. That means that, including the Finance Minister, he could potentially have named a majority of the board, a concern for some investors who have worried about the direction of policy under his government. 

The bank’s board consists of five co-directors, the governor and the finance minister. According to the Council of State’s interpretation of the law, at least two of the co-directors must be women.

Central bank Governor Leonardo Villar said in a statement Friday that he was surprised by the ruling, while adding that the bank will comply. 

The Colombian peso rose 0.5% on Friday to close at 4,865.00 per dollar, while yields on government peso bonds due 2031 rose 24 basis points to 13.29% amid thin trading following Thursday’s US Thanksgiving holiday.

Read More: Petro Urges Investors to Keep Cash in Colombia as Peso Dives

Hawkish Member

While the news is perceived as negative, it likely won’t have much market impact in the short term as it will only be until early 2025 before the board will have a majority of members appointed by the Petro administration, said Andres Pardo, chief Latin America macro strategist at XP Investments, adding that the key element to watch for now is Carrasquilla’s potential replacement.

The ruling “leaves out one of the more hawkish members of the board,” he said. “Petro’s choice of Carrasquilla’s replacement in the next few weeks will be very relevant to understand the type of profile he will be looking to have inside the board: whether someone with a technical background or someone closer to his political and ideological preferences. Petro’s past remarks point to the latter.”

The presidency and finance ministry didn’t reply to written request for comment. 

Petro has had a rocky relationship with investors in his four months in power, with the peso losing more than 10% since the inauguration amid repeated policy u-turns by the leftist government. Trading in credit default swaps shows that investors now regard Colombia as riskier than Brazil, even though it enjoys a higher credit rating.

“A combination of this political noise, still-climbing inflation and Colombia’s twin deficits are likely to continue to weigh on the peso in the medium term,” BBVA strategists led by Alejandro Cuadrado wrote in a note.

Read More: Colombia’s Policy U-Turns Are Piling Up Under New Leftist Leader

Following it’s monthly meeting Friday, the central bank reiterated its long-term inflation target of 3% which it doesn’t expect to meet until the end of 2024. 

--With assistance from Maria Elena Vizcaino.

(Updates with central bank comment in 6th paragraph.)

©2022 Bloomberg L.P.