Abstract
Colombia' s political risk ratings have improved in recent times. The changing
fortunes of the Fuerzas
Armadas Revolucionarias de Colombia (FARC) have
been largely behind the improvement in
Columbia' s security position. The
insurgent group, which has dominated Colombian politics in recent
years,
has suffered a number of significant defeats in recent months that have left
the group severely
hobbled. Further defeats continued in the past three
months.
A major turn in the fortunes for FARC occurred in March 2008, when
Colombian troops raided a FARC
rebel camp in Ecuador, killing 20 people,
including senior rebel Raul Reyes. While this weakened the
power of the
FARC, it did temporarily damage relations with leftist countries Ecuador and
Venezuela,
who did not agree with Colombia fighting battles in their
country.
On March 2 2009, the Colombian army claimed it had struck another
blow against the FARC rebels,
killing the commander of a guerrilla front
operating in central Colombia. Revolutionary Armed Forces of
Colombia, or
FARC, Eastern Bloc commander Jose de Jesus Guzman was killed by army troops,
the
military' s press service said. The army also announced it had
unearthed guerrilla hide-outs in caves deep
in the jungles where rebels
evaded attack, stashed land mines and stored medical supplies. The army
said
troops had been searching for the hide-outs for five years.
Colombia is also focused on maintaining its financial assistance from the US
government to fight
terrorism and the FARC. Colombia would like to
persuade President Obama and his administration to
continue to provide
$556mn a year in military and economic aid to Colombia as part of the Plan
Colombia deal. Currently, the US and Colombia are negotiating a further
defence cooperation agreement.
The agreement will formalise the
military-to-military relationship between the United States and
Colombia
and is expected to be completed in April. A component of this deal will be
that Colombia
allows US planes to fly into its bases.
A deteriorating
economic outlook will certainly be a concern for the government, which will
want to
retain its sturdy popularity ratings in the lead-up to next year' s
elections. That said, we are yet to witness
the announcement of a major
counter-cyclical stimulus package by President Álvaro Uribe' s
administration, perhaps because at present they are still forecasting the
economy will expand by a robust
3.0% this year. While this may well change
once Q408 data is released (recent comments by Finance
Minister Óscar Iván
Zuluaga suggest this 3.0% figure could be downgraded), we are sceptical as to
the
ability of the government' s fiscal coffers to accommodate a hefty
expansion in public expenditure this
year, particularly when revenue from
oil exports and tax receipts looks likely to suffer from subdued
global
oil prices and rising unemployment levels. As such, if there are risks to our
negative 1.5% real
GDP forecast for this year, we believe they are to the
downside.
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