June 2, 2010
Washington, DC
A few days ago, Colombian voters went to the polls for the first round of their quadrennial presidential elections. For many, it will be the most important decision of the new century thus far.
The current President, Alvaro Uribe, leaves office later this summer after two consecutive terms in office. He is legally barred from serving a third term. Uribe is regarded as the nation’s savior by many Colombians, and as the devil incarnate by others.
While his administration was salted with multiple accomplishments and scandals, Uribe’s lasting legacy will be the tough war that he waged on the FARC and paramilitary groups… and by many accounts, it is a war that the government has won.
I need to pause for a moment and explain a bit about the differences in the various groups in Colombia, which are often used interchangeably by mistake.
The FARC (Revolutionary Armed Forces of Colombia) is a Marxist guerrilla group numbering anywhere between 10,000 to 20,000 strong. The FARC’s aims are political, and they fund their operations primarily through ransom kidnappings.
Conversely, the paramilitary groups in Colombia consist of loose factions that are largely driven by economic prospects rather than political change. They are not Marxists, they are drug traffickers and extortionists.
While in office, Uribe stood up to both the FARC and paramilitaries, waging a tough war of attrition that turned his nation into a police state, albeit a much safer one than before.
According to Uribe’s numbers, over 16,000 ‘subversives’ have been killed since he took office in 2002, while kidnappings and other violent crime have fallen precipitously. I’m not sure the body stack is an accomplishment, but Colombians generally feel much safer than 5-10 years ago. The credit has gone largely to Uribe.
His hand-picked successor is Juan Manuel Santos, a former defense minister who was an active architect of Uribe’s war on the guerrillas. Santos was credited with engineering multiple blows against the FARC, including the 2008 rescue of Ingrid Betancourt.
Santos is viewed as the Presidential candidate who would most seamlessly carry on Uribe’s policies and maintain the stability that the current government has been able to achieve. As such, Santos was the undisputed victor in the first round of the Presidential elections, and he will advance to the June 20th runoff.
Some Colombians, though, are ready for a change. They are weary of the super-security culture in their country and would rather focus on things like education, regulatory reform, and economic growth rather than continuing to wage war on fractured guerrilla organizations.
The second candidate who will join Santos in the upcoming runoff is former Bogota mayor Antanas Mockus– an eccentric mathematician and university professor who is as close to Santos’ polar opposite as it gets among political candidates.
Mockus is a self-proclaimed pacifist whose focus on education and tolerance propelled him to second place in the first round of the elections with 21.47% of the vote. He is the change candidate and represents the desire of at least a minority of Colombians who want to move on from terrorism and security.
Santos garnered 46.57% of the votes in the first round though, so it is widely expected that he will handily win the June 20th runoff election to become Colombia’s next president.
The Colombian peso, local stock market, and government bonds have all rallied on the expectation of a new pro-business, pro-security Santos administration. Santos himself has stated that he would like to raise tax revenue, not by increasing tax rates, but by encouraging investment to boost production instead.
I’ve stated before that I think Colombia is largely undervalued. Real estate prices, for instance, are incredibly cheap in many parts of the country, frequently selling for less than the cost of construction. This is due mainly to the ‘Colombia stigma’ that has long plagued the country… it keeps foreigners out and prices low.
In the not-so-distant-future, though, I expect this stigma to fade… possibly under a Santos administration. When that happens, you can be sure that Colombian assets will experience significant growth.
Overall, I think the country has one of the brightest futures in Latin America.
