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The Colombian peso fell on Monday and local currency bonds and equities were sold off after voters unexpectedly rejected a peace deal with Marxist rebels, plunging the country into uncertainty.
Colombians voted in a national referendum on Sunday by a margin of just 55,000 votes to rebuff a peace deal struck between the government and the Revolutionary Armed Forces of Colombia (Farc) that aimed to end a 52-year conflict that has left over a quarter of a million people dead and displaced 7m. The surprise result countered polls which suggested an easy win for the Yes campaign; it leaves the country divided with no back-up plan.
Juan Manuel Santos, Colombia’s president, who led the Yes campaign, and former president Álvaro Uribe, who led the No vote, have both separately called for a “national pact” to find an alternative way forward. But neither has yet said what that might be. Rodrigo Londoño, the Farc’s leader who is better known as Timochenko, has said he will continue to work for peace despite the referendum result, and that he wanted to be part of the dialogue.
“Peace has not been defeated,” the government’s lead negotiator Humberto de la Calle said on Monday. “We have to look for a national accord.”
If there is one thing that capital markets don’t like, it is uncertainty. And if there is one thing that Colombia is currently awash with, then, it is that
Investors, though, voted with their wallets. “If there is one thing that capital markets don’t like, it is uncertainty,” said Rupert Stebbings of Bancolombia. “And if there is one thing that Colombia is currently awash with, then, it is that.”
In early trading, the peso dropped by 3 per cent, its biggest one-day drop in three months, while the benchmark stock market index shed 1.2 per cent and the yield on 10-year government bonds rose by 20 basis points to 3.33 per cent.
Sunday’s referendum was to ratify or reject a peace accord signed last week between the government and the Farc that aimed to see rebels disarm in return for political participation. The peace accord had enjoyed broad international support, from Pope Francis to US president Barack Obama. Weighing against the Yes vote was Colombian distrust of the Farc, and Mr Santos’s low approval ratings amid a slowing economy.
The surprise result showed voters choosing No in areas far from the conflict, while the more war-torn countryside opted for Yes, said Sandra Borda, a Bogotá-based political scientist.
“The people who voted Yes did it from a very pragmatic standpoint: to end a war and to avoid having more victims and human rights violations, problems they know all too well. Meanwhile, those who voted No did it based on principles: that there was not enough justice [for human rights abuses by Farc leaders] and that their political participation is unacceptable,” she said.
Moody’s, the rating agency, said the result was “negative for its [Colombia’s] credit profile”. Colombia needs to pass a fiscal reform to offset the loss of oil revenues following the drop in energy prices. Mr Santos had planned to submit a new budget plan after the referendum based on tax rises; Mr Uribe on Sunday said he would only support a reform based on spending cuts.
“The country’s economy is in difficulties and would have worsened with these accords … The risk of losing investment grade won’t be avoided with more taxes,” Mr Uribe said on Sunday.
Despite a widespread longing for peace, Colombians were deeply ambivalent about striking any deal with the Farc, which they view with distrust after five decades of killings, kidnappings and extortion. One particularly emotional point of contention was that Farc rebels would face only lenient punishment.
“I could not understand why a … man like Timochenko wouldn’t have spent a single day in jail and could even be eligible to run as a politician,” said Juan Esteban Londoño, a 39-year-old businessman from Medellín who was once kidnapped by the Farc. “Even a ruthless drug-kingpin Pablo Escobar was more benevolent than Timochenko.”
The No campaign has long suggested the deal could be renegotiated, something that the government denied, repeatedly saying it was the best deal possible.
“Now comes a dialogue that should be done with all political parties,” Iván Duque, a senior member of Mr Uribe’s party, told local radio. “This is the moment to listen to that side of the country which asked for corrections [to the accords].”
It is unclear to what extent the Farc would be willing to renegotiate the accord with Mr Uribe. But a Farc commander known as Byron Yepes told the FT in late September that whatever happened in the plebiscite, “we’ll continue in our search for peace, and that means we’ll even be willing to sit down with Uribe. We’ll always ask him to come and sit down with us. For us, peace is already here.”
The surprise result of the referendum is a blow to Washington, which was one of the most enthusiastic backers of the accord; John Kerry, US secretary of state, was even present at the accord’s signing ceremony last Monday. The vote also sent shockwaves into neighbouring Venezuela, where the socialist government of President Nicolás Maduro played an early role in prodding the Farc to the negotiating table. Cuba, which is Venezuela’s closest regional ally, also hosted the talks.
From Caracas, opposition leader Henry Ramos Allup blasted on Twitter: “If talks between the Colombian government and narcoterrorist guerrillas resume, they should exclude the Cubans from the process,” he wrote. “Whatever the narco Cuban regime touches rots. Raúl Castro, Santos and the narcoterrorist guerrillas are the ones that have been defeated.”
In Colombia, though, the result has shattered the hopes of many who had hoped that the conflict — which has seen leftwing rebels clash with rightwing paramilitaries, and the army clash with narco-traffickers — would end this week.
“I voted Yes because the peace deal would have saved us from many more years of bloodshed,” says Luis Ospina, whose father was kidnapped and killed by paramilitaries. “Obviously we may not like to see these people [the Farc] in Congress. But the benefits are much stronger than the disadvantages.”