What can businesses expect in a post-conflict Colombia? Laura Sharkey speaks to consultancy Control Risk to find out…
We are closer now to peace in Colombia than we have ever been. Agreements have been reached on three of the five main discussion points of the peace talks, and August saw the lowest number of violent actions related to the FARC since 1974.
However, the signing of a peace accord won’t directly translate into an end to violence. The recovery process from half a century of conflict will be complex, both for the country and for businesses operating within it.
In the second part of our two-part series, we speak to Oliver Wack and Daniel Linsker of Control Risks to find out exactly what the business environment could look like in a post-conflict Colombia.
Linsker and Wack begin with one clear point. An eventual peace agreement will open Colombia up as a more attractive destination for investors. Linsker highlights the concept of a ‘peace dividend’, comprising a decrease in military spending and resultant increase in investor confidence. In that context, those who have previously been afraid of investing in a country in the midst of a civil war would see the opportunities that Colombia has to offer for the first time.
However, the peace dividend is only part of the story. The pair urge caution in over-simplifying the situation, as peace will not automatically translate to a panacea for security dynamics. In fact, Wack argues, “criminal dynamics will actually get worse in the period immediately after the peace process” as paramilitary successor groups and former FARC guerrillas struggle to carve out a post-conflict sphere of influence.
Linsker expects the situation to gradually improve in the medium-to-long term. This will happen “as we move away from issues of national security and the capabilities of some of these groups are downgraded once they no longer have a political banner, nor a centralised command, control and procurement potential”. He argues that it will ultimately become a public security matter which is – to some extent – easier for the government to manage.
For Wack, as Colombia becomes a less dangerous country, other risks will emerge. He says, “during conflict, the primary considerations are centralised around security, and other risks are secondary. But in a post-conflict environment, with different political priorities, those secondary risks come to the forefront”. That is to say, certain behaviour that was previously during the armed conflict will no longer be tolerated by public opinion and government. When this happens, corruption investigations and integrity risks are likely to become increasingly important. Wack gives the example of payments by companies to armed groups.
These were fairly standard 20 years ago, and technically legal, but will no longer be acceptable. Then there are issues such as cartels and the fixing of prices in different sectors, which would not have been an issue previously. We are seeing this trend already: in May, an investigation by the Superintendence of Industry and Commerce ruled that companies in the sugar industry had colluded to drive up prices and bar competitors from the market. We are likely to see further investigations of this kind, highlighting the emergence of a business environment with closer scrutiny of integrity which previously had been overlooked.
Linsker advises all investors, new and existing, that a peace accord will not bring an overhauled regulatory environment overnight. However, he also highlights the potential that a post-conflict environment offers. Ideally, he says, “an end to the armed conflict will open up previously uncharted territory – both literally, in terms of geography and also sectorally” in terms of previously uncharted territory – both literally, in terms of geography” but also in terms of new sectors as the government focuses on opening up new opportunities for investors.