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Rejected Farc deal clouds investment climate

Peace negotiations between the government and the guerilla group Farc were already an important factor in encouraging new investment in Colombian agriculture and forestry, and investors are still relying on their ultimate success.

Colombians have rejected a peace agreement negotiated between the government and rebel group Farc, after investors in the region said progress towards a deal was opening up agricultural and forestry investment opportunities in the region.

With a huge potential for agricultural production previously stifled by the war with Farc, which endangered lives as well as occupying land for coca-leaf production, progress towards peace in recent years has been creating “huge expectations” for rural development, according to the International Fund for Agricultural Development.

Funds, including Chilean agri-focused private equity firm Sembrador, impact investors Small Enterprise Assistance Funds and US firm Farmfolio have been raising equity for investment in Colombian agriculture, citing four years of peace negotiations as an important factor.

SEAF chief executive Bert van der Vaart told Agri Investor earlier this year that the resulting government focus on developing rural areas offers tremendous potential for agri investors, while Farmfolio founder Dax Cooke said he was confident that the peace negotiations would lead to long-term investment in rural infrastructure and a stable investment environment. Cooke said that Pro-Colombia, the government entity promoting investment and tourism in the country, had actively courted him and other investors to target rural areas as the government made plans to build up Colombia’s rural economy.

Following the announcement that Colombia had voted against the peace deal, Farmfolio said in a statement to Agri Investor:

“The outcome of the referendum … does not affect Farmfolio’s investment strategy in Colombia, nor any of its holdings. Though the current terms of the agreement were defeated in the popular vote, the ensemble of the Colombian political class is committed to renegotiating some of the terms and going through with the implementation of the Peace Treaty.”

It said that the terms agreed for the Peace Treaty were positive for agriculture and foreign investment, offering legal protection to investors.

“The renegotiation of the terms of the Peace Treaty will likely increase the incentives and benefits for foreign investors given that the opposition groups now represented at the table champion private sector development of Colombian countryside.”

Timberland investment management organisation legal adviser Victor Haley said earlier this year that new opportunities in Colombia and Argentina are causing the most excitement among institutional forestry investors. “They have huge untapped potential,” he said, adding that investors were hopeful political risk would continue to decline.

Years of under-investment in rural areas has created tremendous opportunities to improve efficiency through infrastructure, operational and technology improvements, explained Cooke, saying the company would eventually look to add to its existing investment on Colombia’s Caribbean coast; a teak, organic passion fruit and cattle project.

SEAF’s Colombia Agribusiness Fund, which reached a first close on $20 million in May, plans to prioritise investments “which directly impact rural Colombia and the most vulnerable population groups… as peace negotiations progress following a fifty-year long conflict” according its website.

Growing demand from a professional class in the cities also open opportunities in supply-chain, cold-chain and processing improvements, according to van der Vaart. He said Colombia’s location and a trade promotion agreement signed with the US in 2012 now give Colombia better access to the US market and that over time, the country would attract more investment.

“We have a pipeline and a couple of companies that are close to investment,” he said.

Other investors who have been looking at deals in Colombia include AMERRA. The Colombian government is also looking to raise 1 billion pesos ($333,000; €292,000) for an agtech and agri production-focused private equity fund to improve efficiency in the country’s agribusiness sector.

Colombian president Juan Manuel Santos said he would continue to work on a peace agreement with Farc leader Timoleon Jimenez following the referendum result.