Óscar Iván Zuluaga, candidate for the conservative Democratic Center party of former President Álvaro Uribe, won the first round of the Colombian presidential election held on 25 May. Securing 29% of the vote, the opposition leader finished ahead of incumbent President Juan Manuel Santos, candidate for the centrist National Unity alliance, who gained 26% support. As no contender won an outright majority, the election will be decided in a second round run-off on 15 June. The outcome will hinge on how well both candidates manage to garner support among those who voted for other candidates and – even more importantly considering the dismal first-round turnout of 40% – those who did not vote at all.

Impact on country risk

With both Santos and Zuluaga advocating a continued pro-market stance, liberal economic policies and openness to international trade – that in recent years have supported strong growth and furthered significant foreign direct investment inflows – are expected to prevail in Colombia, regardless of the election outcome. The main issue of disagreement between the two remaining candidates pertains to the peace negotiations that the Colombian government and the Marxist rebels of the FARC (Fuerzas Armadas Revolucionarias de Colombia) have been engaged in since November 2012. Pursuing the talks is a key point on the agenda for Santos. If re-elected, his ambition will be to reach a consensus on the two remaining topics on the negotiating agenda – victims’ reparations and rebel disarmament, demobilisation and reintegration (deals on rural development, political participation and narcotrafficking were struck earlier) – and to start implementation efforts by late 2014 or early 2015. This scenario offers a clear perspective of finally resolving the five-decade-old armed conflict in Colombia. Yet while peace never came closer, Zuluaga fiercely opposes to the talks and rejects any form of rebel impunity. Under his presidency, the government is likely to return to a predominantly military strategy reminiscent of the one during the Uribe presidency of 2002-10. In response, the FARC is likely to step up attacks and try to broaden their geographical scope. Considering the political risk, it is obvious that, should an encompassing peace agreement be reached, this would significantly enhance the Colombian business environment. Crucially, in the medium term, the enhanced stability would further foster investment and improve resource allocation, thus boosting growth.

Analyst: Sebastian Vanderlinden, s.vanderlinden@credendogroup.com