Colombia, like many emerging markets, is suffering amidst two significant and equally damaging forces. A stronger US dollar is reducing competitive advantages for export-driven economies, particularly among Latin American countries where the norteamericanos are invariably the largest trading partner. And Colombia, where oil comprises over 50 percent of total exports, is further impacted by the ongoing crude sell-off. When the Financial Times refers to the ‘broken growth model’ prevalent in today’s emerging markets, Colombia would appear to be a prime example of that unfortunate trend.
Some good news may be on the horizon, though. One of South America’s longest-running and most vicious insurgencies may be nearing an end. On 30 August the FARC (Fuerzas Armadas Revolucionarias de Colombia) announced that peace talks were moving “toward a final agreement” to end a civil war that has raged for the past 51 years. Pressure also seems to be rising against the FARC as negotiations with Bogota approach their conclusion. Recently US authorities levied sanctions against a bodega, or convenience store, in Zurich after accusing the shop’s owners of acting as the FARC’s covert fundraising arm in Europe.
Colombia’s equity markets are certainly overdue for some good news. The Colcap index has dropped 32 percent over the past year, and an astounding 55 percent in dollar terms. Several of the country’s most liquid stocks, to include oil company Pacific Rubiales (-43%) and retail giant Exito (-42%) may bear watching as Colombians hope for a resolution to one of the world’s longest-running conflicts.