We awoke this morning to important news: one, the government of Juan Manuel Santos suspended peace talks with the FARC after the FARC kidnapped a high-ranking general in the Colombian army. Two, Japan has surprisingly fallen into a recession. This adds to the worry, knowing that China’s economy is shrinking. The world’s economy may be in a challenging shape for awhile to come.
How are these stories related? Why are peace talks suspended now? — Given that, just three days ago, it was confirmed the FARC kidnapped two soldiers in Arauca department. The FARC said, we “communicate our will to converse in regards to freeing the two prisoners.” One might ask, haven’t you been conversing in Havana for two years now?
Back-track to weeks, even months ago, when foreign investors talked of Colombia ceasing to be an investor haven. The talk centered on the uncertainty of the peace talks, the decreased price of oil, and the bureaucratic delays in Colombia for granting drilling rights.
It did not help that FARC attacks to oil infrastructure continued. The attacks were a main factor in the falling production of oil. The consequence then should not come as a surprise: energy companies have become reluctant to invest in Colombia.
Oil investment, at $2.8 billion through June, was the lowest for that half-year period since 2011. An oil auction in July lured commitments of $1.4 billion, just more than half of what the government had intended, reported the Wall Street Journal.
Oil is a major revenue that the Colombian state counted on to fund the post-conflict projects, to build infrastructure, roads, tunnels and waterways, as well schools and hospitals.
At the same time that the FARC bombed oil infrastructure, experts calculated post-conflict rebuilding –solely for the countryside — would require between 80 and 100 billion pesos in the next ten years. Additionally, there is the bill for victims’ reparations.
Bank of America calculated Colombia needed US $88 billion dollars over the next ten years for Santos’s post-conflict plans and promises.
And at the same time that the FARC bombed oil infrastructure, Colombian investors tired of already paying high taxes, as much as 50 percent.
If the FARC and the government were talking about a post-conflict scenario, why did the FARC continue bombing oil, the main source of funding for the post-conflict projects?
It makes sense that President Santos, an economist by training, lost his patience yesterday.