As Colombia tries to convince foreign investors that there are enticing business opportunities at hand, the specter of the four-decade-long civil conflict hovers in the background of every discussion. Every year, more than 3,000 people are killed and hundreds are taken hostage by the guerillas. Infrastructure development projects are a ripe target–a prospect that means increased risk and increased costs for investors.t

Guarding infrastructure projects helped push defense spending is at record level.
(Photo courtesy of AP)

Despite this sobering backdrop, many are optimistic in light of President Alvaro Uribe’s efforts to control the conflict and increase security. The administration’s success in tamping down violence in the urban areas, particularly around Bogota, and along the major transportation corridors has allowed more ambitious infrastructure projects to proceed, says Transportation Minister Andres Uriel Gallego. “There is an increase in confidence concerning Colombia among foreign investors due to the reduction of the levels of risk here,” he says.

The government’s military strategy is simple: secure the populated areas, particularly around the capital. The success of that effort has forced the rebel groups to abandon efforts to control specific areas and switch to fighting a more conventional guerilla war

“We are seeing these efforts starting to reach more rural communities but this is part of a larger process that could take another decade to complete,” said Andres Escobar, chief economist for LatinSource, a economic analysis think tank with offices throughout Latin America. “But ending the conflict is not a prerequisite for growth.”.

Although various rebel groups have been in existence since the early 1960s, the explosion of the drug trade in the 1980s and 1990s exacerbated the conflict. In an unholy alliance so-called “narcoguerillas” began to rely on the drug trade in the regions they controlled as a means of financing their efforts and the famed cartels of Colombia began their own conflict with the government.

In the late 1990s, the conflict helped spin Colombia into its worst recession on record, says economist Juan Carlos Echeverry with the University of the Andes in Bogotá. “The political turmoil caused by the narcotraffickers war against the government undermined the government credibility,” Echeverry says. “As confidence diminished, interest rates spiked and it began to snowball.”

That concern exists today as well as the conflict affects the political stability of the country, he notes, but it is tempered by the prospect of Uribe winning a second term in the May 28 elections. Victory would give him a mandate to continue his approach to domestich security policy as well. In October 2005, Colombia’s supreme court cleared the way for Uribe to run for reelection. Recent polls show his approval rating to be nearly 80s percent.

The biggest threat to stability is the Revolutionary Armed Forces of Colombia, known by its Spanish language acronym, FARC. Founded in 1964 as the military wing of the Colombian Communist Party, today it is estimated to have more than 12,000 members and controls more that a third of the country. In addition, there are several smaller revolutionary groups, such as the National Liberation Army, or ELN.

Complicating the situation is the existence of numerous right-wing paramilitary militias that emerged in the 1980s to provide wealthy ranchers protection from the rebels. They rapidly transformed into criminal drug-trafficking organizations and are accused of perpetrating numerous human rights offenses. The largest, the United Self-Defense Forces of Colombia, or AUC, numbered more than 20,000 at its peak. A government-sponsored disarmament program has led to more than 13,000 laying down their arms in the past few years.

The primary reason for the tenacity of these groups is the financial support they glean from the drug trade. According to a report released earlier this year by the Joint Intelligence Command, the Colombian equivalent of the US National Security council, the total income for the FARC in 2003 was as much as $1.3 billion. An estimated 45 percent of that total comes from cocaine sales, the majority of the rest from extortion and kidnappings.

Uribe, who took office in August 2002, has made controlling the conflict a centerpiece of his administration and experts believe his popularity – current polls put his approval rating at nearly 80 percent–is a result of it’s success. Since he took office his administration has increased the number of security personnel fighting guerrillas, paramilitaries and drug traffickers. Military spending under Uribe has grown to historic levels, approximately 4.5 percent of the country’s GDP in 2005. Most of has gone to increasing the military ranks.

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  • That policy has been credited with the dramatic drop in homicides and kidnappings in the country. According to the Presidential Program for Human Rights more than 1,250 persons were abducted in 2004–a 42 percent drop from the year prior.

    Despite the successes and ongoing peacekeeping efforts, however, the violence continues. According to the Associated Press, more than 30 police officers have been slain since October in remote areas and the group continues to hold three American contract workers and at least 65 police officers hostage.

    That feeds concerns of companies looking to invest in Colombia, Echeverry said.

    “Overhead increases due to the need for better security but the project risk increases as well due to the fact the internal conflict can severely effect the ability to reach contract performance targets,” he said.

     Colombian companies say that the internal conflict is a part of doing business and can be dealt with like any other obstacle.

    A key strategy to offset reprisals is to make efforts to help the communities where the projects are located such as building schools and paying for teachers to instruct in them, said Jose Torres, the regional infrastructure director for ConConcreto, Colombia’s largest construction company.

    “There is more security in these regions today,” he said. “In the past these have been regions where it was complicated to work and very risky but we don’t feel that level of risk anymore.”

    Projects located in remote regions such as the Meta Rubiales oil and gas field in the Llanos basin spend thousands of dollars on security and work closely with the military to ensure their work can proceed.

    “When you work in these remote areas like this, it is a constant concern you have to deal with,” said Jan Veldwijk, chief executive officer of Meta Petroleum Ltd.