It has been a bitter sweet week for Juan Manuel Santos. The peace accord he spent four years negotiating with the Farc was rejected by a razor-thin margin in a referendum last Sunday. Then his efforts to end the 50 year conflict were recognised on Friday when he won the 2016 Nobel Peace Prize – even though the committee acknowledged there was “real danger the peace process will come to a halt and the civil war will flare up again”.
For now, Colombia remains in an uncomfortable state of limbo, with many furious at what they see as self-interested sabotage by Álvaro Uribe, the intense former president who led the “No” campaign. With the outcome of the referendum as unexpected as Brexit – ringing loud alarms for those that view the prospect of a Donald Trump presidency with foreboding – there appears to have been no Plan B. The uncertainty weighed heavily on Colombian assets, especially as a new era of peace was expected to benefit the economy. Moody’s said the result was credit negative.
The market gloom in Colombia contrasts with continued exuberance on Brazil’s bourse, which hit a two-year high this week, making the Bovespa the world’s best performing major stock index this year. The sense that the worst may be over in Brazil was strengthened after pro-business candidates performed well in local elections this week, delivering stinging defeats for corruption-tainted parties in the country’s biggest cities.
Meanwhile, markets remain excited about Argentina’s prospects under Mauricio Macri, with investors lapping up Argentina’s third sale of international debt after its return to capital markets this year, and first sale of euro-denominated bonds, raising €2.5bn after bids of more than €6.25bn. For now, investors are showing no signs of concern about the unsettling prospect of social unrest, which remains under control for now.
Quote of the week
“We profoundly lament that those who sow discord influenced the Colombian people…But our resolve to work for peace is stronger than ever. Peace will triumph” - Rodrigo Londoño, the Farc leader known as Timochenko, from Havana after Sunday’sreferendum.
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