Guess who's back?

As FARC rebels announce their plans to rearm, we assess the impact on the emerging cannabis industry.

By: Mat Youkee

For investors who have bought into the Colombian PR push over the last three years, the revival of the country’s internal conflict has come as a nasty shock. On August 29, several leading figures of the FARC guerrilla group posted a video on YouTube, announcing a “new era of struggle” on “the corrupt, the media and the oligarchy.” The group’s return to arms represents a new stage in the conflict between the Colombian state, violent dissidents and the government of Venezuela.

Following a peace deal signed in November 2016, an estimated 13,000 FARC guerrillas, of whom 7,000 were armed combatants, have demobilized. The deal was imperfect and fragile. By focusing on the weaknesses of the deal and by rowing back both on its terms and its spirit, however, President Ivan Duque ensured its rupture. The risks to cannabis companies are both physical and reputational.

The new guerrilla unit, named FARC- EP, is estimated to have around 2,000 armed fighters under his command. Like rival group the ELN – which bombed a Bogotá police cadet school in January – the group will primarily operate in the Venezuelan border region, finding refuge under the friendly regime of Nicolas Maduro when the armed forces push back. In September, Colombian weekly Semana published leaked Venezuelan government documents showing the country’s military had been ordered to provide shelter, training and weapons to ELN and FARC fighters in return for intelligence on Colombian military installations.

The risks to foreign enterprises operating in rural Colombia depend on the region in which are operating, Sergio Guzmán, director of Colombia Risk Analysis told CCI. “The media is currently magnifying the risk and there is a lot of confusion. Actors need to keep a cool head and take time to understand whether the territory they are investing in is at risk.” According to Gúzman, the departments of Arauca, Norte de Santander, Caquetá, Guaviare and Cauca are the most exposed.

Investors must do due diligence on the relevant security dynamics in the cultivation region and on the Colombian partners they will be dealing with.

On September 12, the Colombian army announced it had confiscated 1.4 tonnes of black market marijuana and arrested three FARC dissidents in the town of Corinto, in the Cauca department. The FARC’s 2016 disarmament opened the space for many criminal groups to take over its old drug routes. The new context means these drugs busts will be viewed under a different optic.

“We’ll see a contagion effect,” says Guzmán. “Every dissident will be labeled a member of the FARC-EP and be given an amplified political and military relevance they don’t deserve. Most weed traffickers are in it for themselves, not to finance a Venezuelan proxy-war on Colombia.”

Over the last 18 months, CCI have taken numerous inquiries from international investors who seemed rather too blasé about political risk in the sector. At the regional level, it cannot be stressed enough that investors must do due diligence on the relevant security dynamics in the cultivation region and on the Colombian partners they will be dealing with.

At the macro level, recent events highlights that having a free-market, right wing government is not a panacea for foreign investment. The return to arms of a small proportion of the FARC poses a limited and manageable risk to cannabis growers in rural areas. But it is a risk created unnecessarily by the Duque government.