Colombia’s peace deal opens the door to British business

Sunday’s referendum, when the Colombian people will decide whether to support their government’s peace agreement with the Farc rebels after half a century of conflict that has cost 260,000 lives and displaced millions, promises to be a watershed moment for the country.

A yes vote would mean more than an end to 50 years of violence. It would also provide a shot in the arm for Colombia’s stuttering economy and opportunities for UK businesses in the aftermath of Brexit.

In 2014, Colombia was one of Latin America’s fastest-growing economies, with GDP growth hitting 4.6 per cent and per capita incomes more than doubling to $2,424 a year over the previous decade. Since late 2015, however, it has been more of a bumpy ride: thanks to Colombia’s heavy dependence on oil exports, the plunge in oil prices has contributed to both higher inflation and rising interest rates.

But there’s good reason to be optimistic about the future. Colombia has been forced to look beyond its reliance on oil, diversify its industrial base and enter into public-private partnerships. Improvements to infrastructure such as road and rail systems are one of the quickest ways of boosting an economy, and Colombia’s government has recognised this.

A $70bn plan stretching to 2035 will include the largest road infrastructure programme in Latin America, with more than 100 road projects covering more than 12,500 km; more than 1,600 km of new railway lines; maritime projects on eight rivers covering 5,000 km; 31 airport expansions; and major port developments. Other investments aim to reduce the housing shortage by half over the next three years, with plans for 450,000 new homes. In addition, the government will invest $6bn in the construction of new schools and parks.

The most recent economic forecast by the OECD predicts growth will strengthen to 3 per cent in 2017, largely because of these infrastructure plans. The peace deal could provide an extra boost – it will mean areas that were previously inaccessible because they were controlled by the Farc will be open for development. Indeed, a study by the Colombian government’s National Planning Department estimates that GDP will increase by 4.8 per cent in the year the peace agreement is signed and continue to grow over the following years.

Brexit means the UK will have to forge relationships with other trade partners as it extracts itself from the EU. But British business will have to dispense with its outdated perception of Latin America. The image of Colombia as violent and drug-ravaged still persists – perhaps not helped by the popularity of Narcos, the hit Netflix series about Pablo Escobar – but it’s one that dates from almost three decades ago.

In fact, Bogota is now the second largest luxury goods retail market in Latin America, showing 16 per cent year-on-year growth, which explains why companies like Waitrose and Virgin Mobile have started operations in the country. Colombia also now has companies that are fully capable of partnering internationally, such as the likes of Grupo Argos and Grupo Aval.

Another false perception is that Spain has Latin American nations like Colombia tied up. Yet the Spanish only account for 1.6 per cent of Colombia’s imports. The UK’s share ($661m, or 1.1 per cent share) pales in comparison to Germany ($2.51bn, a 4.1 per cent share), France ($1.82bn and 3 per cent) and Italy (£991m and 1.6 per cent). As Nick Clegg said on a trade mission in 2014, “The UK took its eye off the Latin American ball and as a result we’ve fallen behind many of our European competitors”.

Regions within Colombia are largely autonomous in their economic and development policy, so there is more scope for different infrastructure programmes than in highly centralised countries: projects rarely become the political footballs that they do in the UK. Added to this mix is a light-touch regulatory system. In 2013, Colombia was invited to start the process of becoming a full member of the OECD, in view of its increasingly transparent investment regime and a reduction in restrictions on international investment. Colombia has one of the most open markets in Latin America with 13 free trade agreements with neighbouring countries. In the World Bank’s ease of doing business index, Colombia ranks highest of all Latin American countries.

Colombia is not immune to the knock-on effects of the problems affecting its close neighbours. Brazil, of course, is still mired in a political crisis and a deep recession, Venezuela is in a protracted decline and many other countries on the continent are struggling to reform. But there’s greater reason now to be confident about its prospects than for some years. The weekend’s result could spell a fresh dawn for Colombia’s economy – and new opportunities for British companies.

Santiago Klein is managing director of McBains Cooper International, a leading property consultancy with offices in the UK, Colombia and Mexico.