On 23 September, Colombian President Juan Manuel Santos travelled to Havana, Cuba, where his government and the Marxist rebels of the FARC (Fuerzas Armadas Revolucionarias de Colombia) have been engaged in peace talks since November 2012. He did so to meet FARC leader “Timochenko” for the first time ever, and to announce that an encompassing peace deal would be signed within six months (with rebel disarmament to be completed no more than two months after that). The statement follows the reaching of a consensus on what was widely considered the thorniest topic on the negotiators' agenda: what to do with those accused of crimes during the fighting. On that issue, it was agreed that Colombian and international judges will be able to offer reduced or alternative sentences in exchange for full confessions. Yet while sentencing guidelines emphasise the importance of truth and reconciliation, perpetrators of crimes against humanity – such as torture or assassinations – will not enjoy amnesty.

Impact on country risk

The announcement of an imminent peace deal has brought Colombia closer than ever to ending the five-decade-old FARC conflict that left 220,000 dead and worsened the narcotics problem throughout the Americas. Clearly, this is good news for the Colombian business environment and longer-term growth potential. Indeed, the prospect of enhanced political stability will encourage investment and improve resource allocation. In that sense, the agreement comes at the right time. Economic growth in Colombia has slowed down markedly owing to adverse price evolutions of oil and coal, the country's two prime exports goods. Moreover, the resulting deterioration of the current account deficit and investment opportunities has caused a sharp depreciation of the peso, thus fuelling inflation and sapping confidence. The improved security outlook may somewhat alleviate the stresses, even if successful implementation of the expected peace deal is far from certain. For one thing, many Colombians fiercely oppose a deal, and President Santos promised that the eventual agreement would be put to a referendum. Also, the agreement will need to survive the scrutiny of Colombia’s Constitutional Court as well as the International Criminal Court. Furthermore, there is the risk of certain FARC factions rejecting the eventual agreement and breaking away to form criminal gangs. Already, a host of criminal activities – ranging from drug trafficking to illegal gold mining, kidnapping and extortion – represent a major source of income for the rebels and it may prove hard to lure them away from these undertakings in favour of other employment opportunities. Here, the past provides an interesting example. Criminal gangs that emerged from the remnants of the right-wing paramilitary groups (that were formed in the 1980s and 1990s to confront the FARC) have in recent years overtaken the leftist rebels as the biggest security threat in Colombia. Analyst: Sebastian Vanderlinden, s.vanderlinden@credendogroup.com