Colombians rejected a landmark peace deal in a shocking vote this past weekend.
On Monday, the country’s currency and stocks reacted negatively. Colombia’s peso fell 2.6% Monday. Stocks fell too — the MSCI Colombia, which represents the country’s largest publicly-traded companies — quickly shed 3% once markets opened.
“The rejection of the proposed peace deal was not expected nor discounted by the market,” says Alberto Ramos, head of Latin America research at Goldman Sachs.
In a referendum vote on Sunday, Colombians voted against a peace deal with the rebel guerrilla army known as FARC that would have ended a 52-year civil war. The conflict killed an estimated 220,000 people and displaced millions.
It took four years for the Colombian government and FARC leaders to reach a deal. Colombia’s president, Juan Manuel Santos, wanted the Colombian people to ratify the peace deal in a referendum vote.
But Colombians narrowly rejected the deal, with 50.22% voting against it. Many Colombians believed the deal would have been too lenient on FARC leaders who committed war crimes.
Colombia’s economy already faced a litany of headwinds despite being one of the best performing economies in Latin America. The peso fell 18% and 25% against the dollar in 2014 and 2015 respectively. It had started to regain momentum this year. But now things appear uncertain.
After growing at 6.6% in 2011, Colombia’s economy slowed down over the years, only growing 3.1% last year. Its chief export is oil and low crude prices have hurt its growth prospects.
Santos — along with many economists — argued that peace had major economic benefits. They anticipated that peace would increase stability, encouraging more foreign investment and the development of FARC-controlled territory.
Although the failed deal isn’t expected to cause an economic crisis soon, the shocking outcome raises concerns, experts say.
“There is still a lot of uncertainty about what comes next,” says Adam Collins an economist who covers Colombia at Capital Economics, a research firm. The no vote “does raise political risks.”
culled from: http://money.cnn.com/2016/10/03/news/economy/colombia-peace-peso-market/index.html?section=money_news_international&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+rss%2Fmoney_news_international+%28CNNMoney%3A+International+News%29