Monday, October 3, 2016

What’s Ahead For Colombia After Voters Reject FARC Peace Deal

Government and guerrillas say they’ll continue to seek peace; Opinion polls had forecast that voters would approve deal.

October 3, 2016

Colombia faces uncertainty after voters unexpectedly rejected a peace deal between the government and Marxist guerrillas that was hammered out during four years of talks in Cuba. President Juan Manuel Santos had said there was no “Plan B” in case of defeat.

What Happened?

Colombians narrowly nixed the deal by 50.2 percent to 49.8 percent, with nearly two thirds of voters abstaining. Santos and the leader of The Revolutionary Armed Forces of Colombia, or FARC, had already signed the peace pact last week at a ceremony attended by regional heads of state and United Nations Secretary-General Ban Ki-moon. The referendum result followed at least three polls published last week predicting the deal would pass by 60 percent or more.

Turnout in the Caribbean coast, which overwhelmingly backed the deal, was even lower than the national average as the area was hit by rain caused by Hurricane Matthew, according to electoral authorities.

What Was In The Agreement?

The deal would have guaranteed the FARC ten seats in Congress between 2018 and 2026, agricultural reform and reduced sentences for crimes committed, in return for handing in their weapons to UN monitors. A “yes” vote would have given the green light for the guerrillas to start the demobilization process and convert themselves into a legal political party.

What Happens Next?

There’s no immediate prospect of a return to all-out violence. Santos said the bilateral cease-fire will hold, and he will continue to seek a negotiated settlement. FARC leader Rodrigo Londono told local radio stations the group retains a willingness to use words rather than weapons, and that "peace will triumph." Santos is sending his negotiating team to Cuba on Monday to meet with the FARC. He’ll also call a meeting of all parties, including former President Alvaro Uribe’s Democratic Center Party, to try to work how to proceed.

How Will Markets React?

Goldman Sachs analyst Alberto Ramos said the peso and local peso-denominated bonds will sell off as the rejection of the deal was a surprise. Citigroup Inc. analyst Munir Jalil said the outcome will make it harder for the government to pass a tax reform bill, which it needs to do this year to offset a loss of oil revenue and prevent a downgrade. The Finance Ministry estimates that an end to conflict would boost growth by 1 percentage point per year.

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