Colombia’s peace deal is great news for investors

A peace deal to end decades of fighting is the latest sign of Colombia's bright future, says James McKeigue. And it's one more reason to invest in the country.


President Juan Manuel Santos shook hands with Farc leader Timoleon Jimenez

Hope. After more than a century of conflict, this week's peace deal brought hope that Latin America's longest-running civil war could be nearing its end.

Around 220,000 people have been killed by the bitter struggle, which forced millions to leave their homes. So Wednesday's historic handshake in Havana, Cuba between Colombian president Juan Manuel Santos and Farc (Revolutionary Armed Forces of Colombia) leader Timolen Jimnez, alias 'Timochenko' was a major breakthrough.

News of the deal, which for the first time laid down a framework for achieving peace, was met with both optimism and cynicism. World leaders queued up to express their support for the process, while some critics in Colombia began pointing out the roadblocks to any potential agreement.

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While this deal could get caught on any number of hurdles, it marks a turning point in Latin American history. The brutal struggles between the left-wing revolutionaries and right-wing reactionaries ravaged the region in the second half of the 20th century. Farc's protracted resistance was one the last convulsions of that epic struggle. As was Cuba's communist model. Now it seems that both are gradually changing their tune, marking the end of an era for Latin America.

Colombia's deadly struggle

Today the majority of Colombia's population are middle class' and live in cities. I am a bit sceptical of some definitions used to describe the middle class in Latin America, but there has definitely been a big shift, with 12 million Colombians, from a population of 48 million, moving out of poverty since 2000.

Of course the elites remain, but strong economic growth has allowed others to share the pie, with the Gini co-efficient measuring a 7% fall in inequality over the last 15 years. Education quality remains low for the poor, but a far higher proportion of the population has access to university now than 50 years ago. I'm not trying to say that Colombia is a paradise, but the burning injustices that originally sparked the conflict are now far rarer.

And the situation is only getting worse for Farc. A few years ago, I interviewed a Colombian tech entrepreneur from Cali, a southern region associated with Farc. He'd actually met with the guerrillas who'd asked him to design a secure GPS system they could use in the jungle.

He declined the offer, but, as a socialist himself, identified a more fundamental problem for Farc than getting lost in the jungle. "Their whole platform is based around agriculture reform and winning farmland for the people. Chat to any of the young people in Cali and the last thing they want to do is go out and live on a farm." Given that young people ie, those under 20 are the biggest chunk of Colombia's population, accounting for more than a third of the country, it doesn't bode well for Farc's future.

Moreover, as Colombia's economic development spreads, and the expansive infrastructure programme gradually brings the state to the remote hinterlands, Farc will become increasingly irrelevant. Because as Colombian guerrilla-turned-politician, Antonio Navarro Wolff, once said, "guerrillas start when the road ends".

Put simply, social, demographic and economic changes mean that Farc's offer is becoming less and less attractive.

This lack of genuine support has been eating away at Farc for decades. And the only reason that it's avoided the fate of guerrilla movements elsewhere in the region is that it became a major player in the drug business. Controlling vast swathes of remote countryside allowed it to buy and grow coca, turn it into cocaine and ship it around the world. The profits were channelled back into the war, allowing Farc to carry on with a popular uprising' that really wasn't very popular.

Throw in the fact that the Colombian army was getting better at pinning Farc down several top ranking leaders were killed or captured in recent years and you can see why it's keen for peace.

For Juan Manuel Santos, the situation is a bit more complicated. He rose to prominence as the Defence Minister for hard-line President lvaro Uribe, where his day job was bringing the fight to Farc. The two have since fallen out, and Uribe constantly criticises Santos for pursuing peace. The fact is, politically it's easier to kill bad guys than make deals with them. Santos ran his re-election campaign on the peace platform. It worked, but now that he's actually compromising with Farc, it is less popular.

The main sticking point is that most Colombians see Farc leaders as mass murderers and drug dealers and want them brought to justice. Farc leadership on the other hand are trying to transition into legitimate politics and win as much legal protection as possible. As a result, Santos has been forced into a compromise between the two positions, giving plenty of fodder for his critics.

Peace deal: the road to peace

Yet regardless of whether an agreement is reached, it's clear that Farc's life as a political force is coming to an end. Yes, it can carry on running the drugs trade, but it no longer has a serious position in Latin America's political debate.

Moreover, as we've seen from Guatemala to Chile, people power in Latin America has a new face. Across the region, a generation of citizens has grown up with no memory of the brutal dictatorships that took on Latin America's left-wing revolutionaries. This lack of fear explains why mass protests, organised on social media are increasingly the way Latin American citizens hold corrupt government officials to account. I've written about this before, but basically, in Latin America's 'age of protest', you don't need to go and hide in the jungle to take on the government.

If you take a step back, and look at it on a regional, historical level, then we could be on the brink of something huge. The FT's John Paul Rathbone nails it when he hails Cuba's rapprochement and Farc peace process as "momentous events, with regional geopolitical implications that could help untie a horrendous Gordian knot of violence, migration, drug-trafficking and instability that has plagued the Americas for over half a century".

It's also clearly good for Colombia too. Regular readers will know that I've long been bullish on the country. And while my main reasons for liking it are demographics, macroeconomic strength, infrastructure and its open economy, I've long said that a peace dividend could give our investments there another boost.

Santos has spent all of his political capital trying to bring about peace. It will be the issue that defines his legacy. I'm sure he's not completely altruistic politicians are 90% ego and clearly he would love to be remembered as the man who brought peace to Colombia. But something he said in a speech a few years ago in London has always stuck with me: "When you speak to past victims they want Farc to face justice. When you speak to future victims, they want peace." It's a good point. Paying a political cost now is surely worth the social dividends it will bring later.

Colombia is a young, growing country with a bright future ahead of it. The war with Farc has no place in that future.

James graduated from Keele University with a BA (Hons) in English literature and history, and has a NCTJ certificate in journalism.


After working as a freelance journalist in various Latin American countries, and a spell at ITV, James wrote for Television Business International and covered the European equity markets for the London bureau. 


James has travelled extensively in emerging markets, reporting for international energy magazines such as Oil and Gas Investor, and institutional publications such as the Commonwealth Business Environment Report. 


He is currently the managing editor of LatAm INVESTOR, the UK's only Latin American finance magazine.