Colombia – Peace Deal Could Enhance Credit Position

Colombia’s many economic and political advantages have been overshadowed for decades by the long running war with various rebel groups. The recently agreed peace deal could be the beginning of a new era.

Colombia’s recent peace deal with the FARC rebels should bring an end to decades of political violence in the country, and the FARC is expected to formally disband next week. This is good news for a country that has sometimes been described as ‘Latin America’s best kept secret’.

Involvement of the FARC and related groups in the global narcotics trade has overshadowed the reality: Colombia has a generally healthy economy and – by the standards of the region – a mature and progressive political system.

It is also geographically diverse and resource rich, with Atlantic and Pacific coastlines, some major rain-soaked mountain ranges, and an interior where the acreage of fertile, rolling farmland outnumbers that of the southern jungle.

From a firm foundation in agriculture and mining, Colombia has built a surprisingly strong industrial economy and a robust financial system. Its track record on debt and growth is enviable and unusual in comparison to many of the other countries in Latin America.

Colombia has economic challenges – inflation is high by modern standards (but still less than 10%) and interest rates are also high to compensate, while its trade deficit has suffered from weaker global growth. But its debt as a proportion of GDP is less than 40%; a level to make many more developed economies jealous.

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