Colombia: After Peace, Colombia Will Still Struggle

Apr 7, 2016 | Stratfor
View Original

Colombia is at a historic juncture. After 52 years of fighting, the country is on the verge of a peace agreement with the Revolutionary Armed Forces of Colombia, known as the FARC. But the deal will solve only some of Colombia's problems, which extend well beyond security. With oil prices low and likely to stay that way, Colombia has already entered one of its periodic busts, and the government will have to manage sluggish growth and a deteriorating economy. Amid this tough situation, the FARC deal – and related talks with the National Liberation Army (ELN) – will open up the ruling Social Party of National Unity to criticism from its opponents.

But from an investor's point of view, Colombia's straitened circumstances may be a boon. Thousands of militants will soon demobilize, the peso will depreciate, and state-owned energy firm Ecopetrol will likely sell some of its assets. The government will have to navigate the next few years carefully, implementing policies to deal with the secondary effects of low oil prices, including fewer infrastructure improvements, government austerity measures and a wider-than-normal trade deficit.