Friday, Dec 15, 2017
Finance | Industry & Trade | Government | Others | South America | Colombia

The Cost of Conflict

Economic commitment to peace


2 years ago

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In the midst of difficulties involved in negotiations between the Colombian government and FARC to put an end to more than 50 years of violence, an eventual post-conflict scenario makes the country’s business owners dream of ways to capitalize on the profits of a Colombia without war.

An analysis by the National Planning Department (DNP) states the nation’s conflict with FARC costs the Colombian economy between 0.5 and 8.32 percentage points of its annual growth rate.

According to DNP’s director, Simón Gaviria, “if the growth rate of Colombia between 2000 and 2009 was around 3.8%, the armed conflict could have cost Colombia more than 100% of its average annual growth rate in that same period.”

For some analysts, the conflict remains between 1 and 2 percentage points of the country’s economic growth. Jorge Restrepo, Director of the Conflict Analysis Resource Center, explains that if today GDP doubles every 18.5 years, without the conflict it could have doubled every 8.5 years.

“The annual increase of GDP, which was 4.3% in 2013, without conflict would have been 8.7%,” writes Mr. Restrepo in a report carried out for the United Nations Development Programme (UNDP).

He also affirms that without the violence associated with the conflict, the financial system would be able to reach more Colombians in rural areas, diminish risk, and increase the possibility of paying off debt more quickly, thereby attracting new investors.

Assuming that the peace agreement with FARC is sealed, the projected increase in economic growth would be by 0.8 percentage points per year, and the next generation would have a per capita GDP 32% higher than what it would have had were the conflict with the FARC guerrillas to continue. 

For this reason, recognized leaders in the private sector have demonstrated their support for President Juan Manuel Santos with regards to the peace negotiations between the government and the FARC guerillas in Havana (Cuba), despite the difficulties presumed to be involved in the agreement, after failed attempts in the past.

For the financial sector, peace would contribute a favorable element in the growth of the economy.

“War is more expensive than peace,” asserts Carlos Yepes, President of Bancolombia and one of the 120 large business owners who have joined the “Soy Capaz” (“I am capable”) campaign, aimed to promote reconciliation.

“Peace would contribute 1.5 points to the Colombian GDP in a sustainable way… instead of spending on bullets, planes, and warships, on soldiers and troops, we could use the resources for what we really need,” affirms Mr. Yepes.

Meanwhile, Luis Carlos Sarmiento, President of Grupo Aval and considered to be ‘the richest man in the country,’ affirms that peace would have an impact on social development.

“I have backed the peace process; the country is accumulating not 50 years, but 60 years of war, which can’t be logical, or fair, and it has to end,” affirms Mr. Sarmiento.

Prominent businessmen from the agro-industrial sector also state that a post-conflict scenario would permit growth in the production and fortification of Colombian campaigns to invest in the countryside.

Mauricio Iragorri, one of the leaders in the Cauca Valley and president of the sugar mill Ingenio Mayaguez, believes it is necessary to give the peace commitment a chance.

“The President has our vote of confidence in the process that’s unfolding. There is a lot of non-producing land that could become productive and could be a topic of negotiation. There are 200,000 hectares that would be useful in fruit and vegetable projects, a great potential,” he states.

Carlos Enrique Cavalieri, President of Alquería, thinks there has to be optimism “facing the possibility of recovering the rural areas that have been marginalized by the violence.”

This stance is shared by Harold Eder of Manuelita LLC, who was affected by the conflict through the kidnapping of his grandfather, Harold Eder, the company’s founder.

“Peace will generate the possibility of better development in Colombia. A country with fewer conflicts will be a favorable country for developing new businesses, which, if that ends up happening, will be a large contribution towards a greater agro industrial projection,” says the leader of the sugar mill.

According to a survey of Bogotá business owners carried out by the Chamber of Commerce, 55% of the 1,328 businessmen consulted in the capital are in favor of the talks.

The survey also concluded that 53% stated they would be willing to participate in a process of reintegration for the guerillas when they are eventually demobilized.

But not just the local private sector has shown motivation. Multinationals have also favorable expectations of an eventual peace agreement.

Jorge Silva Duzán, President of Microsoft Colombia, is convinced that this is a unique opportunity to highlight the country’s potential to impact Latin America and the world.

“There is enormous potential that has to come to light. But even more than that, I think it’s an opportunity to reinvent the country, to change its course. Yes, peace should be negotiated, but it can’t just be signing an agreement,” Mr. Duzán stresses.

Felipe Sardi, Deputy Minister of Industrial Development in the Ministry of Industry and Commerce, states that Colombia has managed to grow and stabilize despite the obstacles to reaching peace, but that finalizing the peace accords would cause foreign investment to grow, thanks to visibility on an international level.

“Tourism would be one of the fronts where we’d see one of the most important increases in foreign investment for the region’s productivity; it’s something we’ll keep hoping for when the violence has ceased completely,” says Mr. Sardi.

For this reason, an eventual scenario of Colombia without war makes the country’s business owners think of frustrated economic projects that could begin to become a reality, based on their confidence of great potential for development that has been obstructed by the violence.

But they caution that while they await the good news that could come from Cuba, they are still willing to continue working in the private sector to close social gaps by generating employment opportunities, entrepreneurial ingenuity, and an economic drive that will contribute, from now on, to building the post-conflict in Colombia.

by Alis Andrea Díaz García



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