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  HOME | Opinion (Click here for more)

Beatrice Rangel: The Economic Consequences of Peace in Latin America

By Beatrice E. Rangel

Colombia President Juan Manuel Santos promptly flew to Havana on Thursday, September the 24th to preside over the signing of an initial peace agreement between his government and guerrilla movements operating in Colombia under the acronyms of FARC and ELN.

As he unveiled to the world the historic event, many minds flew back in time to the short lived peaceful pause breathed by Europe between 1918 and 1939. At the time, John Maynard Keynes reigned supreme among bestselling authors with his book "The Economic Consequences of Peace." The book was an indictment to the Versailles Treaty and a plea to the world powers for a more generous peace so that Germany could get into its feet and create much needed wealth which had been continentally destroyed by war.

Needless to recall that the world had to go yet through another horrific conflict to pay heed to Lord Keynes and the rationale of economics.

And while in polarized Colombia there does not seem to be a Lord Keynes on the horizon, any observer could easily see the first economic consequences of the century old war in Colombia and their implications for the newly initialed peace agreement.

Colombia's physiography is as complex as its conflict. It divides the country into three insulated regions that demand huge infrastructure investments to develop a viable economic system. Such infrastructure is yet to be deployed among other things because rampant war and low intensity conflicts made it impossible to build anything or to replace what insurgent groups have chosen to blow-up for over 40 years.

Exerting the full-fledged presence of the Colombian state has also been trying under such circumstances.

Add to the mix that while Colombia is resource rich in terms of renewables, except for coal it lacks a significant endowment of fossil energy repositories. This explains the rather lackluster development rates that have characterized this nation that paradoxically is home to one of the most vibrant entrepreneurial groups in the region.

To be sure, the Antioquia region has been the development poster boy for Latin America on account of its rugged inhabitants who are great innovators and hard workers and known to the rest of the country and the world as the "paisas."

To this day, Colombians have blamed their conflict as a development stumbling block but almost all formulas to address the challenge led to a cul-de-sac up and until President Alvaro Uribe decided to confront the 800 pound gorilla head on. After decimating the irregular armies, their leaders were ready to take up the peace proposal offered by President Santos.
Colombia is now awakening to new a reality that for good, bad, or ugly will remove the political excuse of violence as an explanation for unsuccessful economic performance. And this is perhaps the first consequence of peace. Colombians will be more demanding of their public leaders when it comes to delivering development. Traditional corruption seems to be headed towards a concrete wall. Colombians will soon expect to soon see infrastructure reconstruction to better serve and unite the country.

Colombians will also demand better and more effective public services. And this will probably require the paisanization of the public sector -- a feat that will demand the transformational talent of Merlin the magician.

Then comes the fate of 4.6 million displaced Colombians who have been denied all public goods including the right to identification. Training and settling these people is a task that could easily absorb two decades and that calls for the development of successful public-private partnerships to incorporate what amounts to about 10% of the Colombia population to the normalcy of civic life.

Drug production and trafficking is yet another challenge. As the situation stands, about 1% of GDP comes from these activities. And a new generation of cartel leaders has responded to competition from Venezuela and Mexico with specialization. They have invested in genetic modification in order to produce top quality cocaine that sells much better in the international market. Coping with this wave of entrepreneurial innovation will prove to be difficult for any government.

Finally there are the remnants of the guerrilla movement turned into drug producers.

Although birth certificates for these organizations are difficult to come by, they seem to have taken ground in the 1960s under the leadership of Camilo Torres and Perdo Antonio Marin, whose nomme de guerre was Manuel Marulanda aka Tiro Fijo.

Tiro Fijo was the son of a peasant family decimated by violence. He had seen his siblings die under conservative bands gunshots. Camilo Torres was a Catholic priest who followed and expanded father Gutierrez's Theology of Liberation.

Both movements were born under the aegis of the fight against poverty and exclusion in Latin America. Supported by the now defunct Soviet Union, these movements soon realized that their days were numbered when their patron eastern colossus collapsed.

Contrary to Central American movements that opted to negotiate peace agreements, the Colombian insurgency entered the lucrative drug business. This explains their resilience to fighting against almost every single democratic administration during the better part of the 20th century and the Uribe administration.

These groups have now demanded special treatment by the justice system and should the Supreme Court opinion of Friday September the 18th prevail they could become a special class of citizens who could enjoy the economic benefits of the drug trade and the legal benefits of the peace treaty. And this could prove to be the Achilles heel of this peace process, as it would be simply acting as nursery to the emergence of powerful political groups with enough economic might to impose their will over the population. This could severely limit democratic freedom and economic development. Lest drug consumption is universally legalized, Colombia's peace could come at the expense of rule of law which is the scarcest of all goods in Latin America.

Beatrice Rangel is President & CEO of the AMLA Consulting Group, which provides growth and partnership opportunities in US and Hispanic markets. AMLA identifies the best potential partner for businesses which are eager to exploit the growing buying power of the US Hispanic market and for US Corporations seeking to find investment partners in Latin America. Previously, she was Chief of Staff for Venezuela President Carlos Andres Perez as well as Chief Strategist for the Cisneros Group of Companies.

For her work throughout Latin America, Rangel has been honored with the Order of Merit of May from Argentina, the Condor of the Andes Order from Bolivia, the Bernardo O'Higgins Order by Chile, the Order of Boyaca from Colombia, and the National Order of Jose Matías Delgado from El Salvador.

You can follow her on twitter @BEPA2009 or contact her directly at BRangel@amlaconsulting.com.

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