Risk forecast: Outlook for Colombia peace talks increasingly positive

A recent announcement by Colombia’s government to push forward negotiations over a bilateral ceasefire with rebel group FARC increased the chances of peace talks succeeding.

On 14 January, President Juan Manuel Santos announced that he had ordered his delegates to broach the possibility of a bilateral ceasefire, in peace talks with the Revolutionary Armed Forces of Colombia (FARC) in Havana, Cuba.

This came almost four weeks after the FARC, Colombia’s largest insurgent group, had itself proclaimed a unilateral ceasefire, putting the onus on the government to reciprocate.

The government and the FARC have been engaged in peace talks since November 2012, and have achieved draft agreements on three out of five agenda items – rural development, political participation and illegal drugs.

A bilateral ceasefire is likely to be agreed, and will increase the strategic and political stakes for the government without fully guaranteeing a successful outcome to the talks.

Nevertheless, it will represent a significant and necessary step towards de-escalation of the conflict and bring the signing of a final peace deal appreciably closer.

Ceasefire not without costs

A long-lasting bilateral ceasefire brings with it substantial strategic risks, something of which the government is all too aware. Santos had until now argued that aggressive ‘business as usual’ on the military front was the only way to oblige the FARC to progress towards an agreement, and that any bilateral ceasefire prior to the signature of a final peace deal would enable the insurgents to regroup and recover. The way in which the FARC used the large demobilized zone awarded it during peace talks with the government of former president Andres Pastrana (1998-2002) to bolster its strength, serves as a potent precedent in this regard.

Politically, the move would seem to risk alienating an electorate which has demanded a firm hand with the insurgents even as it accepts the peace talks as a necessary development. Alvaro Uribe, former president and now leader of the right-wing opposition, has already denounced Santos’ announcement. Poll data from December 2014 shows that support for a negotiated end to the conflict, while substantial, fell markedly through the second half of the year, and that an increasing majority of voters believe that the talks will be unsuccessful.

Calculated risk likely to benefit investors

Notwithstanding the potential political and strategic risks, a bilateral ceasefire will represent a positive development for the private sector, particularly extractive investors in rural areas. It will both reduce operational security risks in zones affected by the conflict and increase the likelihood of a positive outcome to peace talks.

Most obviously, a bilateral ceasefire will help foster increased trust between the parties, and build momentum towards the signature of a final peace deal as discussions on the last two agenda items progress. In addition, a sustainable and enduring cessation of hostilities by the FARC will help increase public support for the talks. This, in turn, will help reduce any threat posed to the terms of a final deal by an eventual referendum to ratify it.

A bilateral ceasefire will also prevent ongoing military operations on both sides from jeopardizing negotiations during the remainder of the talks. Government operations since the FARC declared a unilateral ceasefire on 20 December have elicited multiple warnings from the group that it would have to reconsider the move if such operations continued. More generally, the temporary suspension of talks in late 2014 over the FARC’s kidnapping of an army general underscores the potential threat to negotiations in this regard.

MORE: Colombia: security outlook at stake following suspension of peace talks

Furthermore, de-escalation has assumed particular importance given that the last agenda item to be discussed – the practicalities of ending the conflict – is also among the most contentious in requiring the FARC to commit to a series of steps to disarm and demobilize. Such steps may include, for example, gathering operatives in pre-identified zones. In representing a preliminary step towards such a process, a bilateral ceasefire will likely make agreement on this point easier for the guerrillas to contemplate.

The government’s hope that a peace deal will be signed in 2015 seems increasingly likely to be satisfied. A substantial period will still then elapse between signature of an agreement and its ratification and implementation, and Colombia’s road to peace is not yet fully assured. However, the introduction of a bilateral ceasefire will substantially reduce risks for investors.

Author James Lockhart Smith is the Latin America director of Verisk Maplecroft, a world leading daily risk analysis and forecasting service.