John Vizcaino / REUTERS

The Economics of the Colombia-FARC Peace Accord

Why Selling the Deal Based on Expected GDP Gains Is Shortsighted

The signing of a peace accord between the Colombian government and the Revolutionary Armed Forces of Colombia (FARC), the leftist guerrilla group, in November 2016 might mark the beginning of the end of a 53-year-old conflict. In its efforts to sell the ongoing peace process, the government has focused in large part on the deal’s economic merits. Government officials and research papers have emphasized that a strong and lasting peace will bring key benefits. But for the past two years in Colombia, discussions about the benefits have seemed to focus on one key element: the number of percentage points it is likely to add to the national gross domestic product (GDP).  

Implementing the deal will be far from easy. De-escalation of the conflict was followed by a cease-fire in August 2016, and demobilization of FARC fighters accelerated in early 2017. But opponents of the country’s peace deal are set to make it a pivotal issue in the 2018 parliamentary and presidential elections, and a testing security environment in some of Colombia’s regions will likely challenge the full establishment of peace for years to come.

Given the various obstacles the deal has and will continue to face, emphasizing its economic advantages makes sense from the government’s perspective. These are effects from which most of the population can potentially benefit. But claiming that peace will bring specific additional percentage points to Colombia’s GDP ignores the vast array of components that contribute to a country’s economic growth over time. Moreover, it has dangerously staked the agreement’s legitimacy on how much the Colombian economy grows over the coming years.

GROWTH EXPECTATIONS

Economic forecasting is notoriously difficult. Yet in the heat of discussions about the peace agreement’s merits, Colombian officials and economists have put forth specific growth figures. Colombia’s National Department of Planning (DNP), for example, published a report in December 2015 estimating that peace will increase Colombia’s annual GDP growth by 1–1.9 percent. A report by the National Association of Financial estimated between 0.5 and one percentage points of extra growth. Others have claimed that the benefits of durable peace could translate into as much as an additional 4.4 percent in GDP expansion annually.

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