How could China take advantage of the Colombian peace deal?

There might be speculation surrounding the economic effects of Colombia’s peace agreement with the FARC guerilla, as there isn’t any clarity on just how much will the economy grow after its implementation. Supporters of the deal guarantee that it will pretty much usher in a new golden age for Colombia, whereas detractors argue that any improvement stemming from peace will be pedestrian at best.

Despite the controversy, one thing is for sure, peace will shift investment priorities. Investment regarding defense will probably either divert into other sectors or stop completely. This is big news for the United States, whose most notorious form of investment was Plan Colombia, a military investment assistance program designed to combat drug trafficking and consolidate state presence in Colombian territory. At its peak in 2006, the United States was investing $641 million into Colombia’s defense organisms while only investing $139 million in economic and social programs.

The peace deal means that what used to be the bulk of US investment in Colombia is likely to shrink, or even disappear completely. Furthermore, as defense investment becomes less important, so does US economic influence in Colombia.

The reality is that, unless the US transitions its investment strategy neatly into the post conflict (something that seems unlikely considering that this is an election year), they will leave a power gap in Colombia that other global powers would be smart to try and fill.

The largest among the candidates is China, who has made its intention to consolidate its power in LatAm very clear. Most recently, their clear approaches to the Pacific Alliance, where Colombia is one of four members, showed their will to push for economic integration and stimulate multilateral trade.

But besides efforts on a regional scale, China has done little to court Colombia by itself. The relationship between Colombia and China, although always open, has been slow and rather uneventful. The peace deal then, could serve a stimulating role in China-Colombia relationships, as Colombia becomes more open to investment from any source and the United States’ position of superiority comes to an end.

China is one of the biggest players in the region in what refers to loans. Venezuela received 17 Chinese loans in the last couple of years, totaling $65 billion, Brazil received eight loans for a total of $22 billion and Argentina received another eight loans for $15 billion. Colombia, on the other hand, received a single solitary loan worth $75 million. If China is to take advantage of Colombia’s new peace deal, expect this number to go up.

Colombia is of great value for China in the LatAm scenario. It has the 3rd largest population, it is strategically located between the Pacific and Atlantic Oceans and it is a key exporter of commodities. In a post-conflict Colombia, China would be out of excuses to play as strong a role there as it plays elsewhere in the region.

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