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Worldcrunch

Peace Dividend? Measuring Colombia's Profits And Loss From FARC Settlement

Article illustrative image Partner logo File photo of a Colombian peace march

BOGOTA - Last month marked the third time in a half-century of armed conflict that the FARC rebels and Colombian government started a bona fide peace process.

Colombia faces more than one threat to public safety, but the fight against the FARC insurgence is the most burdensome for the military budget, which surpassed 3.7% of GDP last year.

The war has left tens of thousands of victims, and the monetary losses are calculated at around $114,472 million, in the past ten years alone. That figure includes military expenditures, losses related to attacks on infrastructure, and relief for people affected by the conflict, according to a study by the Liberal Party and the Polytechnic University of Colombia.

So it is not strange at all that Colombians are crossing their fingers that these talks will work, in spite of a lack of confidence from the failures of past talks. But there is one important detail that often gets lost: peace is not free, and Colombians will have to finance it.

First of all, there should be no expectation of a reduction in military expenditures. Experience in other countries, and in previous peace processes in Colombia, has shown that it is important to maintain a military presence to control people who, in the end, do not demobilize. That is especially the case in Colombia, where in addition to the FARC there is also the ELN guerrilla group (the National Liberation Army, another communist revolutionary armed group), criminal gangs, narco-traffickers, and delinquents.

“Since we are a country that is growing, with more international potential, that growth should be accompanied with a greater capacity to maintain peace and security,” explained Roman Ortiz, a security consultant. “That is why the military budget has to stay where it is now, at the very least.” In fact, an analysis by market research firm Raddar expects that at the most, the Colombian military budget would be reduced by 5%.

But the real cost is in disarmament, demobilization, and rehabilitation. According to Raddar’s analysis of the Colombian peace process, if you take those costs into account, the government will need to invest $556 million in the next five years.

The government already has programs to reintegrate former fighters into civilian life, for those who have individually chosen to give up their arms. This also includes paramilitary forces demobilized between 2005 and 2006.

Recent studies from the Colombian Reintegration Agency show that each demobilized fighter costs the government an average of $10,000. The process involves psychological and medical support, as well as basic education, which can range from primary-school level to technical skills. The program lasts an average of seven years.

In addition to this, there are grants, for professional projects or seed capital for rehabilitated fighters, of up to $4,400. In addition, when fighters leave halfway houses they are given $300.

If you add up all of these expenditures, assuming FARC has 9,000 members, according to official figures the expenditures could reach roughly $102.6 billion.

Then there is the other side: victim reparations will involve a huge financial effort. To cite just one example, last year the National Council of Economic and Social Policy (CONPES) appropriated a large amount of money to apply the Law of Victims and Restitution of Lands, which is intended to return two million hectares of land to families displaced from their land by conflicts, as well as provide other types of restitution.

Where is the money?

The obvious question is: where is the money is going to come from? Camilo Herrera, president of Raddar, says that better security, resulting from the end of FARC’s activities, will create better economic growth. “Will we be more competitive and more productive? The costs, and risks, of operations will drop and investment will increase,” he says.

According to the School of Advanced Administration Studies (CESA), in the medium term, economic growth related to peace with FARC could mean between two and three more points in the GDP. Other estimates place the peace dividend closer to between one and two points of growth.

Since Colombia also has other armed groups, what guarantees that they will not affect the security situation? “Demobilizing the guerrillas could be economically advantageous, but the important thing is that we are not going to have just one demobilization process, because we have these other groups," Ortiz explains.

The business sector also wants to weigh in on the debate. Rafael Mejía, president of the Society of Agriculturalists in Colombia, is an optimist and prefers to see the glass half full. For him, it’s a process that all Colombians, in accordance with their economic resources, will have to contribute to.

“The private sector is ready to do what it takes to finance it, but I hope we will be united. For this to work we need to have the whole country participating,” he said.

Mejía goes even further, pointing to the responsibility that all people have in relation to narco-trafficking, which bankrolls most of the subversive activities.

“When will there be a substitute for growing narcotics? When people in the cities understand that the agricultural sector also has a right to be profitable, that it’s not just about buying cheap food,” he explained. “If we want people to stay in the country and not grow narcotics, agriculture has to be profitable.”

Another advantage for businesses would be the increase in labor that would be available thanks to the demobilization. But that is also a challenge, because not everybody will be able to join the local business-stimulating projects that the government set up for former FARC fighters.

“The question is whether the FARC will be willing to take the jobs,” Mejía said, explaining that life in the working class can be difficult.

In addition to signing a peace agreement and its potential economic consequences, Colombia is faced with another major challenge: demilitarizing people’s hearts. Half a century of war has left gaping wounds, and reconciliation is not an easy task. Will people employ someone who, years ago, attacked the capital or extorted businesses? Will they accept a commander who was responsible for kidnapping politicians? Will we see a mid-level FARC fighter as a cashier in the supermarket? That will be the real challenge for Colombia.

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About this article source Website: http://www.americaeconomia.com/

America Economi­a is Latin America's leading business magazine, founded in 1986 by Elias Selman and Nils Strandberg. Headquartered in Santiago, Chile, it features a region-wide monthly edition and regularly updated articles online, as well as country-specific editions in Chile, Brazil, Ecuador and Mexico.

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