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Bogota Bombing: Is Colombian Security Risk Escalating?

|Includes:Ecopetrol S.A. (EC), GTE

Just when we are seeing positive signs regarding the security situation in Colombia with the FARC renouncing the use of kidnapping of civilians for ransom, 2 people have been killed and 39 injured in a bombing in Bogota. The bombing, an attempted assassination, targeted the former Interior and Justice Minister in the government of President Santos' predecessor, Alvaro Uribe. Prior to this bombing a car bomb was also detected and disarmed in Bogota. The car has been attributed to the FARC but there is uncertainty over who is behind the attempted assassination.

This indicates just how fluid the security situation in Colombia is and how quickly it can change as discussed in my articles; Beat the BRICs: Invest in Colombia, Latin America's Hidden Investment Gem and Gran Tierra Energy: Is it Time to Invest in this Latin American Oil Small Cap?

However, it is to early to say whether it is the sign of a prolonged terrorist campaign against the government or an escalation in the security risk. There are a wide number of armed groups operating in Colombia and to date the government has taken strong measures against all of them. This includes the killing by police of the leader of the Urabenos (a neo-paramilitary group) in northern Colombia and ongoing military successes against the FARC. There has also been a crackdown in Medellin against the Oficina de Envigado an organized crime group, which is the last element of Pablo Escobar's former empire.

I certainly don't believe that the bombing represents an escalation in risk in Colombia for investors, if anything it is representative of the current security situation and the threat that Colombians deal with on a daily basis. But it does confirm that investors in Colombian companies or companies operating in Colombia should remain aware of the security environment and the effects its changes can have on their investments.

Disclosure: I am long EC.

Stocks: EC, GTE