Cracks in Colombia's Peace Deal

Leading members of Colombian guerrilla group the Farc (Fuerzas Armadas Revolucionarias de Colombia) renounced the peace deal and returned to armed struggle. LatAm INVESTOR investigates the impact for investors...

The Farc peace deal allowed Colombia to showcase its recent economic and social progress to the world. Now that Iván Márquez, the former Farc peace deal negotiator, and fellow high-level Farc figures, Jesus Santrich and Hernan Darios Velasquez, have signalled a return to arms, it shows just how fragile that progress really is.

Guerrillas or plain criminals?

One of the economic benefits of the peace deal was reduced security costs for companies in remote areas. It also promised to open up new parts of the country to investors, such as mining or energy companies. In practical terms the latest announcement doesn’t change the security situation. Although that depends if Márquez and co succeed in persuading significant numbers of the estimated 11,000 demobilised former guerrillas to join them.

"In practical terms the latest announcement doesn’t change the security situation…"

In the meantime, their only options are to join the existing Farc dissident soldiers – there are about 2,300 dotted about the country but most act as narco groups rather than political fighters – or make an alliance with the left-leaning National Liberation Army (ELN), which recently made some territorial gains.

Political impetus

For Colombian president, Iván Duque, this could be good news, says Nicholas Watson, Latin America Director at Teneo, a political intelligence consultancy. “A reconstituted enemy - however small it actually is as a military force - could give Duque a political direction that he has so far lacked, while providing a useful distraction from the legal difficulties that his mentor, ex-president Álvaro Uribe, finds himself in, together with fresh impetus heading into the October regional elections.”

"The real impact of the peace deal for international investors was always more symbolic than practical…"

Duque’s biggest problem is that the flare-up with the Farc comes amid a weak economic backdrop. The government’s efforts to close the fiscal deficit are necessary but restrain GDP growth. Meanwhile the low oil price is hitting both government revenues and private-sector investment. All of this is contributing to a faltering property market, with house prices at a 13-year low, that undermines the influential construction sector and consumer confidence. The real impact of the peace deal for international investors was always more symbolic than practical. With its economy showing signs of stress, Duque will hope the Farc doesn’t scare off much-needed investment.