Juan Manuel Santos, a former defence minister, won Colombia’s presidential election by a landslide last Sunday. Local markets bounced on the news as Santos has pledged to follow in the footsteps of Alvaro Uribe. He clamped down on Marxist guerilla group FARC and pushed through market reforms.
What the commentators said
Uribe’s security build-up after his election in 2002 reduced the guerillas “to an irritant”, as The Economist put it. The vast improvement in security has ushered in an investment boom that has underpinned growth. The economy expanded at its fastest pace in 30 years in 2007, with foreign direct investment reaching an annual record of $10.6bn the following year. The economy is now bouncing back from recession and should grow by 3% this year. Much of the investment money is going into the oil sector, which is growing rapidly now that this territory, once occupied by insurgents, is being tapped.
There’s still plenty of work for Santos to do, however. The budget deficit has widened to a relatively high 4.5%.
Meanwhile, Capital Economics points to further required reforms to bolster the business climate and free up the labour market. The good news, however, is that policymakers have a record of being “proactive” when it comes to dealing with the country’s economic problems, says Morgan Stanley. That implies “strong and sustained growth in the years ahead”. HSBC’s chief executive now expects Colombia to be among the next generation of BRIC countries. Colombia, said Rupert Steppings of Celfin Capital, is becoming “a very exciting story”.