President Juan Manuel Santos began his second term in office on August 7th, 2014. Four years after the beginning of the peace conversations between the Colombian Government and the Revolutionary Armed Forces of Colombia (FARC – Fuerzas Armadas Revolucionarias de Colombia), on August 24th 2016, the delegations from FARC and the Colombian Government announced the end of the negotiations after agreeing on the 6 points of the agenda that was covenanted in 2012: agricultural development policy (May 2013); political participation (November 2013); illicit drugs problem (may 2014); victims of the conflict (December 2015); end of the armed conflict (June 2016); and, implementation, verification and referendum (August 2016). Next day, on August 25th, President Santos presented to the Congress the final text of the Peace Accord, a previous step to the referendum that will take place on October 2nd where Colombians will vote before it is fully made into law. On August 29th 2016, at zero hours, the Government and the FARCs began the bilateral and definitive cease-fire.
The signing ceremony of the peace agreement with the FARCs on September 26, 2016 sets the beginning of the demobilization and concentration in 31 rural areas across the country where combatants will have to turn their weapons over.
On March 30th 2016, the Colombian Government announced the end of a peace conversation agenda with the National Liberation Army (ELN - Ejército de Liberación Nacional). The talks in the public phase will take place mainly in Ecuador, with four other different locations. The Government and ELN said they will discuss a six-point agenda: participation of society in the peace building process; democracy for peace; transformation for peace; victims; end of armed conflict; and implementation.
On 2015, Colombia remained among the fastest growing countries on the region thanks to an effective macroeconomic and fiscal management. Nevertheless, the country was significantly affected by the global economic slowdown and lower oil prices, and the economic growth slowed from 4.6 percent in 2014 to 3.1 percent in 2015. The slowdown was mainly due to the extractive sector, while services remained the main engine of growth, and agriculture and manufacturing began to recover towards the end of the year. On the demand side, household consumption continued to drive the economic activity, while the government consumption and investment slowed and export fell significantly.
The adverse external environment is expected to further impact the Colombian economy in 2016. Growth is expected to moderate further to 2 percent, before beginning to recover in 2017.
Unemployment reached a record low in 2015 (8.9 percent), following important reforms to reduce non-wage labor costs and despite the slowdown in economic activity. Fiscal management continues to be strong, as shown by the continued compliance with the fiscal rule that was first instituted in 2012. In 2015, the structural fiscal deficit of the Central Government was 2.2 percent of GDP; accounting for the economic and oil price cycle, the actual deficit reached 3 percent of GDP.
Colombia’s flexible exchange regime is the first line of defense to the external shocks. The unfavorable external environment has contributed to a strong depreciation of the peso. The US dollar reached COP 2,958 on September 2016, up from average of COP 2,000 in 2014. This large depreciation, coupled with the effects of the El Niño phenomenon on food prices, has pushed price increases above the upper limit of the targeted band (2-4 percent), to 8.1 percent on August 2016. The interest rate hikes that the Central Bank has implemented since September 2015 are expected to help to gradually bring inflation towards the target range by 2017.
Last updated: September 26, 2016