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Will Colombia Peace Negotiations Lead To A Brighter Economic Future?

05 May 10:00 by Matt Walters

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For international businesses working out of Colombia, 2015 was a year marred by much economic uncertainty. This unrest was emphatically highlighted by several multinationals, including Apex Tool Group, PayPal, Lloyds TSB Bank and Banistmo, announcing that they were terminating operations and withdrawing their services from the Colombian market. PayPal has claimed that its departure from Colombia is due to complications with its online payments, while Lloyds and Banistmo maintain that their exits are to focus on their concerns within the UK market. This year, Citibank has followed suit and announced its intentions to leave the territory.

Despite plausible reasoning, rumours continue to circulate that the exit of so many corporate giants is due to low income, high ratings and increasing inflation, which in March 2016 reached its highest level since 2001 at eight percent. In addition, the global crash in oil prices has had a significant impact on the Colombian economy, with oil trade contributing to around 50 percent of the country’s exports. With the Colombian peso so strongly linked to energy prices, the oil crisis has resulted in a volatile currency which is strongly linked to the general feeling of an economic slump within the country.

Although what on the surface sounds like doom and gloom, ask any Colombian and they will affirm that this apparent state of flux is in fact the status quo, and in fact forecasters are now predicting a more positive outlook for the remainder of 2016. Over the last month alone, unemployment fell by two points while industrial production index growth reached what was almost a two-year high. It’s also important to note that, despite heavily reported economic struggles, the Colombian economy has grown consistently and continues to do so at an annual rate of three percent.

 So, what exactly is encouraging this slight yet steady growth?

 The recent improvement in rates of unemployment and production come at a time when decades of political unrest are set to come to a head. Last month, protests took place nationwide amid the ongoing peace negotiations with the country’s guerrilla groups, the Revolutionary Armed Forces of Colombia (FARC) and National Liberation Army (ELN). Thousands took to the streets of Bogota, Medellin, Cali and other cities against President Juan Manuel Santos’ government, which has come under criticism from a broad spectrum of trade unions and organisations.

While political unrest and guerrilla activity have plagued the country for more than half a century, it is hoped that the ongoing negotiations to implement a peace deal may come to a conclusion as early as this month, as the FARC and Colombian government continue their peace talks in Havana. So far, the discussions have failed to produce any meaningful resolution that could significantly impact the Colombian population, which is perhaps unsurprising when we consider that the negotiations have been ongoing since 2012.

Over the last few years, attempts to reach a conclusion have been delayed by the FARC’s ceasefire violations, but in September 2015 the end seemed to be in sight, as Santos announced that the government had finally agreed to the terms of a peace deal, to be signed on March 23, 2016.

With the passing of this date a deal is still yet to be signed. However, despite both parties failing to meet the expectations of the Colombian population, recent protests are a continuation of over 60 years of political turbulence and violence. Speaking from a business with a strong presence on the ground in Colombia, the current political climate is far from abnormal, and for those living and working within Colombia it is very much ‘business as usual’.

While many would argue that the economic slump and continued political unrest go hand-in-hand, Colombia’s economy and its political issues have always operated to some extent in isolation from one another; although it may seem contradictory, neither one act as a catalyst or antagonist, instead working relatively independently of one another while sharing and influencing a common set of circumstances. While the impending peace deal will certainly introduce marked improvements within Colombia, the current economic situation is more symptomatic of global issues than of local concerns.

For example, the previously mentioned crash in price of oil per barrel has been detrimental to Colombian exports, but remains an external hindrance which continues to influence international trade not only across South America, but the rest of the world. Throughout Colombia’s recent history there is a common pattern of global problems and crises creating economic tension within the country, however these concerns are not too dissimilar from those of its continental neighbours; as a young country, Colombia has faced growing pains similar to that of neighbouring Brazil and Peru. Furthermore, as one of the few South American countries not to be ruled by dictatorship in the twentieth century, Colombia has faced significant polarisation since violence first began more than half a decade ago.

As Colombia approaches this significant political landmark, it’s clear that the steadily improving economic climate is not a product of improved relations between the government and the guerrillas, but a number of internal factors. These, in part, include thriving agricultural and mining industries and open boundaries which favour international trade at convenient rates. Most significantly, Colombia has established itself as a key supplier to China, now the South American country’s second largest trading partner after the United States.

Colombia’s stable growth is a positive sign that, even facing issues that would stifle the growth of many developing economies, it continues to battle through and is in fact encountering positive growth despite political pressures and economic restrictions. These are factors which Colombia has faced for decades, and its growth as a developing country has not been a result of these issues, but in spite of them.

As peace negotiations come to an end, it is likely that we will see positive changes on both the political and economic spectrum, but regardless of the outcome Colombia remains a thriving nation which is far more prosperous for businesses and safer to reside in than it has ever been before.