Colombia Signs Historic Peace Deal
Juan Manuel Santos was not the first Colombian president to try to make peace with the Farc, and at many points during the rocky negotiations he looked like he wouldn’t be the last. But yesterday it was third-time lucky for Colombia, as it finally brokered an end to its conflict with the Farc. The government will now put the deal it has made before the Colombian people in a referendum and, if approved, will implement a pre-agreed schedule that should see the FARC disarmed in six months. It’s a remarkable achievement that heralds a historic turning point in the country’s future.
Of course there are plenty of bumps in the road ahead. The post-conflict period will come with its own set of challenges as some ex guerrillas are likely to move into other armed groups, such as the ELN, or form criminal gangs. But while the remaining obstacles are substantial they are far outweighed by the benefits of the peace deal.
The first gain comes in the form of the huge international public relations victory. The symbolism of ending the conflict with one of the world’s most notorious guerrilla organisations helps Colombia put a final nail in the coffin of the stereotype that it is a dangerous country. Bernardo Vargas, President of ISA, a Medellin based multi-utility company with operations across the region, told LatAm INVESTOR that the PR win would have tangible results for the country’s firms. “The peace deal will have a huge psychological impact on international investors and encourage them to come to Colombia.” The increased investor interest in Colombia is likely to be particularly strong in the UK, where a Sate Visit of President Santos is planned for November this year.
On the ground
But the peace agreement will also have a big impact on the ground. Daniel Linsker, from the Colombia office of UK consultancy Control Risks, notes that even if some ex-guerrillas turn to crime the profile of their targets will change. “Acts of sabotaging pipelines or power infrastructure are politically motivated and it’s unlikely that ex guerrillas would maintain these activities in their new groups.” He also highlights that any new splinter groups would lose the FARC’s considerable scale, which it uses for logistics or weapons purchases.
The first gain comes in the form of the huge international public relations victory….
At its peak the Farc controlled 40% of Colombia, an area of land roughly the size of Spain. The peace deal means that those huge swathes of the country are opened up to investors. That will boost agricultural production, as farms in these rural areas receive an injection of capital, equipment and best practises. It could also hold the key to one of Colombia’s most intractable problems – it’s worryingly low oil reserves. At current production Colombia would run out of oil by seven years, but now this deal will make it safer and less expensive for oil firms to prospect more areas.
In the short-term peace may prove costly as the government ups social spending to reintegrate ex combatants. Indeed London-based consultancy, Capital Economics, estimates that the extra social cost of peace could be as much as 15% of GDP. That will add further pressure to public finances that are already strained. But over the longer term the economy should benefit as foreign direct investment grows. Colombia’s Central Bank Governor, José Darío Uribe, told LatAm INVESTOR that peace “will have a favourable impact on investment, both from international and local players, and we will see more growth in rural areas.”
A new era
A lot of the factors behind this era-changing moment can be traced back to the last one. In 1991 Colombia created a new constitution that cemented peace with rebel group M-19, decentralised power to the regions, ended the old convention of power-sharing between liberals and conservatives and opened up the economy to international investors. Britain played a significant role in that last transformation, from the help of UK security advisors to the huge British investments in the extractive sector that fuelled Colombia’s growth. Now Colombia is undergoing another epoch defining point in its history with a peace deal, infrastructure programme and economic rebalancing that will all reshape the country. Hopefully British investors are part of the story once again.