BOGOTA, COLOMBIA: Colombian President Gustavo Petro delivers his first public speech from the Casa ... [+]
Colombia’s economy continues to struggle under the leadership of controversial populist President Gustavo Petro. Colombia’s economy grew by around 1 percent in 2023. Around six out of every 10 voters in Colombia disapprove of Petro’s performance as president, according to one recent poll. But Colombia’s economy is expected to grow by 1.5 percent in 2024 and 2.8 percent in 2025. In order to discuss whether security problems will hinder economic growth in Colombia this year, I reached out to Sergio Guzman, the head of Colombia Risk Analysis, a Bogota-based consultancy.
Guzman says that the Colombian government's peace strategy “has produced some advances with the ELN, but it has yet to produce any significant gains with other groups including FARC dissidents or the Gulf Clan.”
Guzman warns, “it will be difficult for the group to demonstrate unity of purpose as [ELN] units in Choco and Norte de Santander continue hostilities against military targets or the civilian population.
But executives at foreign companies who are watching the peace process evolve and scouting potential investment opportunities in Colombia still need to be wary of ongoing risks.
“It is very unlikely that the government will come to aid foreign companies operating in [rebel fighter] territory should their activities face security or social risks,” Guzman says.
He points to the problems faced by Emerald Energy and Zijin Continental Gold as warning signs for foreign companies.
“Although company executives have plead with the government for reinforcements and military presence, it is unlikely the government will comply with a show of force that may dissuade attackers,” Guzman told me.
The World Justice Project currently ranks Colombia as 94th out of 142 countries in their 2023 Rule of Law Index, an evaluation that places Colombia alongside problematic countries including India, Morocco, the Philippines, and Paraguay.
Because of weak rule of law and limited state capacity in many parts of rural Colombia, foreign companies need to leverage their Environmental, Social, Governance (ESG) and Corporate Social Responsibility (CSR) policies in order to foster a functional operating environment at the local level.
“Companies with strong community bonds and social programs are most likely to mitigate risks. Many [executives] in the private sector are currently managing their security risks on their own trying to rely on the government as little as possible and focusing on not attracting a lot of media attention,” Guzman says.
Guzman points to the departments of Cauca and Arauca as two volatile areas that foreign executives should be watching.
“We are watching the department of Cauca with quite a bit of concern at the moment as insurgent groups of all kinds have gained a foothold in the department and have become growingly aggressive against businesses and individuals,” he says.
Highway blockades in Cauca are an ongoing risk for companies moving goods through the department.
“The other department that were watching is Arauca where the ELN have established a significant presence, some considering it a prime case of state capture by an insurgent group. The department is responsible for a large percentage of Colombia's oil production,” Guzman says.
But, overall, it looks like security problems will continue to flare in certain hotspots in Colombia, but aren’t likely to have a major impact on Colombia’s economy in 2024 relative to the dynamics we’ve seen over the past few years.
