A path to peace through inclusion - EIU Perspectives - The Economist

A report from The Economist Intelligence Unit

A path to peace through inclusion

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The peace accord agreed late last year be-

after an earlier version of it was narrowly defeat-

tween the government and the FARC paramili-

ed in an October referendum last year, the

tary group gives Colombia a historic opportunity

peace process seems certain to be a key issue in

to improve the living standards of all its people.

the 2018 presidential election. Moreover, the

More than half a century of conflict cost an esti-

end of a period of rapid commodity-driven eco-

mated 220,000 lives and led over 5m people to

nomic growth has put pressure on the govern-

flee their homes, with severe consequences for

ment’s finances at a time when it is expected to

the country’s prosperity, especially in the rural ar-

spend heavily to fulfil the promise of peace.

eas where violence was concentrated. The ac-

In the more than 50 years that Colombia’s in-

cord makes a “peace dividend” of economic

ternal conflict has been taking place, dozens of

growth whose benefits are shared by every Co-

peace deals have been struck around the world

lombian, not just some of those living in its big cit-

between governments and armed groups that

ies, a real possibility—and also a necessity—if the

had waged civil war. However, all too often, the

peace accord is to succeed in practice.

failure of these deals to deliver inclusive prosperi-

Achieving this peace dividend will require the

ty has led to disillusion with the peace process

right policies, as well as an active partnership of

and in some cases a resumption of violence. To

every group in Colombian society, from commu-

see how things can go wrong, Colombians need

nity groups and charities to the private sector.

only look north to El Salvador, which is now cele-

Bringing about inclusive growth involves actions

brating the 25th anniversary of its own peace

such as creating jobs in areas of high unemploy-

deal amidst high rates of corruption, violent

ment and poverty, empowering women, reduc-

crime, inequality and poverty.

ing corruption and bringing the rule of law to a

In this report The Economist Intelligence Unit

previously informal economy. These are inherent-

considers Colombia’s challenges in the context

ly challenging at the best of times, let alone in

of other countries that have emerged from inter-

places that have long been mired in conflict and

nal conflict, to identify effective strategies and

disconnected from the formal legal economy.

highlight potential pitfalls to be avoided in build-

Some commentators in Colombia have ar-

ing a peaceful, inclusive economy. We focus

gued that implementing the peace accord

particularly on how best to engage the private

could be more difficult than negotiating it in the

sector, including businesses of all sizes, investors

first place. That is not just because the accord

(especially those with a commitment to social

does not have the full support of the electorate;

impact) and philanthropists.

© The Economist Intelligence Unit Limited 2017


The challenges of peacebuilding As the implementation of the peace accord be-

forcement to building roads and other essential

gins, Colombia’s economy is facing the tough-

infrastructure. Some estimates place the addi-

est conditions in many years. After a long period

tional government spending needed to imple-

of strong growth, external factors including the

ment the accord as high as US$44bn over the

apparent end of a long bull market in commodi-

next decade. There may be some cost savings,

ties and a sharp rise in the US dollar have helped

at least in the medium term, from reduced mili-

slow the rate of GDP growth from an average of

tary spending as peace takes hold; and the

over 4% a year during 2001–15 (and record high

FARC has agreed to hand over substantial ille-

of an annualised 8% in the first quarter of 2007) to

gally earned assets. However, how much actual-

2% in 2016. As growth has slowed, the govern-

ly materialises remains to be seen.

ment’s budget deficit has risen sharply to 4% of

Other challenges include demobilising and

GDP in 2016, from 2.4% two years earlier. This is a

reintegrating members of the FARC, something

far from ideal base for what should be a signifi-

on which the government has a relatively good

cant build out of the Colombian state to meet

record; driving out the illegal drugs trade, of

the terms of the peace accord.

which the FARC traditionally has controlled an

At one time, the FARC controlled an estimat-

estimated 60% or more; and creating lots of jobs

ed one-third of Colombia’s territory. Although

in areas where the lack of decent economic op-

that has been reduced over the years, there re-

portunity has driven many into organised crime

main substantial parts of the country that in ef-

and violent rebellion. The millions of people dis-

fect have been beyond the reach of the state,

placed from their homes will need a satisfactory

but are now to be brought under the rule of law.

outcome, and to avoid a sense of injustice, so

That reintegration will involve many calls on the

will those who were not part of the FARC.

public purse, from funding effective law en-

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Lessons from elsewhere Colombia has unique challenges resulting from

tional peacebuilding at Notre Dame.

its particular history. Yet the various opportunities

Those agreements elsewhere that within ten

and difficulties it faces have equivalents in other

years had implemented more than 60% of what

countries that have engaged in meaningful

was required tended to be well regarded and to

peacebuilding and inclusive development fol-

have avoided a return to violence; lower imple-

lowing significant internal conflict. There are sev-

mentation rates were associated with less happy

eral lessons to be learnt from them, not least

outcomes. In particular, in the first year or so,

about the importance of delivering inclusive

there needs to be clear progress on arms control

economic growth to underpin other aspects of

and security. Ideally, this includes addressing root

the peace process.

causes of the conflict, and showing socio-eco-

“Business can play a crucial role through its ability to engage across traditional lines of ideological difference” John Paul Lederach, professor of international peacebuilding, University of Notre Dame

nomic improvements and political changes that reassure both the wider society and private sector that the situation is stabilising around fairness in both access and participation. As well as its financial muscle, “business can play a crucial role through its ability to engage across traditional lines of ideological differ-

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The evidence shows clearly that economic

ence,” adds Professor Lederach. And while

growth in post-conflict countries reduces the risk

both national and local government have the

of renewed armed conflict, according to a sur-

responsibility to get roads and other infrastruc-

vey of the literature by The Portland Trust, a not-

ture built, business can bring the logistical exper-

for-profit which supports peacebuilding between

tise and other know-how to connect producers

Israelis and Palestinians through private sector

in the worst afflicted or neglected parts of the

development. Growth stimulates job creation,

country to mainstream markets.

which reduces grievances and makes armed

Business played a crucial role in Northern Ire-

conflict less attractive to would-be rebels. The le-

land, with the Confederation of British Industry

gitimacy of post-conflict government is closely

maintaining an extremely bullish attitude to the

tied to a country’s economic performance.

opportunities created by the peace agreement

The Kroc Institute at the University of Notre

there. So too in South Africa, where despite on-

Dame has assembled a database of the 34 most

going challenges, the government pushed busi-

comprehensive peace agreements reached in

nesses to quickly improve the number, conditions

1989–2012 to end internal conflicts. Analysis of

and status of black workers. Rwanda has been

this “peace accord matrix”, which tracks the im-

growing rapidly and fairly inclusively, helping the

plementation of some 51 provisions over the ten

country maintain its peacebuilding effort de-

years after agreement is reached, has generat-

spite its still poor record on human rights and

ed several findings relevant to Colombia.

press freedom. By contrast, oil-rich South Sudan

At over 300 pages in length, the Colombian

was well placed for rapid economic growth af-

deal is unusually detailed and comprehensive,

ter gaining its independence, but its brief peace

but it is crucial that a large part of what has been

had given way to civil war before investors and

agreed is implemented as quickly as possible,

businesses had mustered the confidence to

says John Paul Lederach, professor of interna-

make a significant commitment.



Strategies for Colombia Based on evidence from similar peace deals

to the mainstream of the city, a crucial role was

elsewhere, the top priority for Colombia should

played by businesses such as EPM (Empresas Pú-

be to make quick progress on implementing

blicas de Medellín), the local power utility, says

what has been agreed, with the greatest em-

Aldo Civico, an expert in conflict resolution at

phasis on showing progress on security: disarm-

Columbia University in New York.

ing the FARC and establishing the rule of law in

There are significant reserves of commodities

formerly FARC-controlled areas. It would also be

in areas that have been controlled by the FARC,

wise, given the political risk of the peace process

some of which have been subject to illegal min-

being seen as too friendly to the FARC, to

ing. With the right infrastructure, such as roads,

promptly launch the process of truth and recon-

this could be a valuable source of jobs and

ciliation. After that, the next priority should be to

growth—though for that growth to be properly

stimulate economic development, especially in

inclusive, roads built to connect mines should

the areas most afflicted by FARC activities, by

connect currently isolated communities rather

engaging business. Under the peace accord,

than, as was often the case in the past, bypass-

this engagement is envisaged in large part to in-

ing them.

volve participation alongside community groups

Much of the area that was controlled by the

and local governments in several regional col-

FARC is essentially informal, beyond the rule of

laborations.

law, with few significant companies and a reli-

Several vehicles for collective action by busi-

ance on subsistence agriculture. Often that

ness have been launched, such as the Business

means growing coca for the illegal drugs trade,

Council for Sustainable Peace (Consejo Empre-

from which the FARC profited mightily.

sarial por una Paz Sostenible). These need to be

There are big opportunities to build up the ag-

supported wherever possible and encouraged

ricultural sector in these areas. This would involve

to turn words into actions. Creating tax incen-

persuading farmers to switch to legal crops, such

tives for investing in certain parts of the country

as cocoa, helping them build businesses, and

could also help, as would public-private partner-

embedding them in supply chains that connect

ships which shift some of the risk onto the govern-

them to Colombia’s main markets and beyond.

ment. Multilateral agencies such as the IDB,

This is likely to be a long process, which could be

which are keen to support Colombia’s peace

accelerated by big companies committing to

process, can also play a useful role here.

long-term purchasing agreements with farmer

There are also encouraging examples of busi-

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cooperatives.

ness playing a positive role in generating inclu-

The Colombian government has been look-

sive growth in some of Colombia’s biggest cities,

ing at creating public-private partnerships to de-

which have enjoyed something of a renaissance

velop these rural economies, which could help—

in recent years. Medellín, for example, has been

although industry is at such an early stage of

transformed from a notorious drugs capital into a

development in much of the areas that it needs

flourishing metropolis, with the third highest So-

the sort of painstaking capacity-building work

cial Progress Index score of all Colombia’s big

that is often better supported by social enterpris-

cities. As well as a social urbanism that has

es, philanthropy and impact investors than by

helped join once isolated and depressed areas

government or big business.



In search of impact Several philanthropic foundations belonging to

comes. Fundación Corona, with the IDB, the

Colombia’s biggest families have already been

Swiss government, the Department of Social

involved in supporting activities aimed at gener-

Prosperity of Colombia, Fundación Mario Santo

ating inclusive growth. That includes working

Domingo and Fundación Bolívar Davivienda

with the country’s small but growing impact in-

have been working on one to increase the em-

vestment sector, which aims simultaneously to

ployability of vulnerable people, including some

make a profit and achieve a social or environ-

displaced by the conflict. If the initial results are

mental goal. In Colombia, impact investors are

good, there is the potential to scale up fast.

exploring opportunities to get involved in back-

Figuring out how to mobilise significantly more money behind similar initiatives is an urgent chal-

“Business is willing to contribute to the peacebuilding process, but is waiting for the government to set out a clear vision.” Maria Victoria Llorente, executive director, FIP

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lenge. A greater willingness of foundations to bear the “first loss” risk on impact investments would certainly help make them more attractive to mainstream investors. As they mature, Colombia’s foundations are increasingly focusing on setting outcome goals and rigorously monitoring

ing businesses in areas such as rural develop-

progress towards them, says Mr Uribe, which

ment, providing basic services in urban environ-

could be crucial in identifying what is working, in

ments and reducing youth unemployment.

order that it can be scaled up. Greater interest in

Delivering better outcomes in these and other

impact investing from Colombia’s pension funds,

social areas is closely aligned with stability, giving

which have started to dabble in the sector,

Colombia a historic opportunity to pioneer im-

would also help.

pact investment as a way of supporting

Yet for now, despite all the positive talk and

long-lasting peacebuilding in a post-conflict

sense of opportunity, the private sector has yet

scenario, says Sebastian Welisiejko, a former

to engage fully with the peacebuilding agenda.

chief economist of The Portland Trust who is now

“Business is willing to contribute to the peace-

working with the Global Steering Group for Im-

building process, but is waiting for the govern-

pact Investment (GSG).

ment to set out a clear vision,” says Maria Victo-

One illustration of what is needed is the

ria Llorente, executive director of FIP (Fundación

US$1.15m investment in 2016 by Acumen, an in-

Ideas para la Paz), a think-tank in Bogota. Busi-

ternational impact investor, in partnership with

ness is holding back because of a “feeling that

USAID, America’s aid agency, in Cacao de Co-

there are a lot of uncertainties related to politics,

lombia, a producer and marketer of premium

security and the provision of the necessary pub-

chocolate from farmers in conflict-affected are-

lic goods,” she adds. The prospect of the peace

as. This was a first investment from their US$4m

accord being damaged by the forthcoming

joint initiative, the Investing for Peace Fund. Pilots

presidential race is a particular worry. Quick pro-

are also being launched of social impact bonds,

gress on all these fronts would greatly increase

which reward investors only if the activities they

the willingness of business to play its part in build-

are funding achieve pre-agreed social out-

ing peace through inclusive growth.



Whilst every effort has been taken to verify the accuracy of this information, neither The Economist Intelligence Unit Ltd. nor the sponsor of this report can accept any responsibility or liability for reliance by any person on this report or any of the information, opinions or conclusions set out in the report.

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