Peru And Colombia: Breaking Free Of The Commodity Super Cycle

Courtesy of The Financial Times, a look at the economic development of Peru and Colombia:

How would South America’s economies fare if commodities suddenly collapsed? Probably not very well. Indeed, that is why many investors still view the region as a cyclical play on world, and especially Asian, growth.

Yet over the past two decade or so, two countries – Colombia (profiled in this FT special report) and Peru – stand out as having undergone a structural step-change that may well endure whatever might happen to the commodity cycle. It is no accident that they are also among the region’s most dynamic economies.

Both Lima and Bogotá have quelled left wing guerrilla insurgencies so that insecurity no longer represents a systemic threat to the state. This in turn has opened up vast areas in each country to legitimate economic activity, especially mining. Meanwhile, a state of relative peace has also allowed both governments to begin to address other issues – such as competitiveness and social inequality.

In Colombia, the change can be particularly striking, especially when looking at the country’s second city, Medellín, only 20 years ago dubbed “the murder capital of the world”; the state of the mining and oil industries; the boom in corporate M&A, as seen in banking and aviation; or the unexpected boon that Colombia has enjoyed from transplanted Venezuelan oil executives who have fled Caracas.

Of course, many challenges remain for the country. The word “peace” is still a relative term. Colombia’s much needed infrastructure improvements have so far been slow in coming; and, as José Antonio Ocampo, a former finance minister argues, Colombia’s boom is in turn throwing up new challenges.

Still, none of these new challenges are so daunting as to discourage ex-pat Colombians from returning home. The country, by and large, also has a favourable view of how President Juan Manuel Santos is dealing with them – sniping by former president Álvaro Uribe aside. Last month, one poll showed Santos taking a mid-term drubbing. Last week, however, Gallup showed his rating rising by a couple of percentage points to a comfortable 64 points.

This entry was posted on Tuesday, May 8th, 2012 at 10:23 am and is filed under Colombia, Peru.  You can follow any responses to this entry through the RSS 2.0 feed.  Both comments and pings are currently closed. 

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