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Colombian Security Situation Continues To Improve; Bodes Well For Investors

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

We are seeing continuing improvements in Colombia's security situation as the FARC continues to soften its agenda due to ongoing Colombian military successes against them. In November 2011 we saw the death of the FARC leader Alfonso Cano after a long military pursuit in the peaks of the Andes in the Departments of Cauca and Huila.

Since then the FARC have made significant overtures for seeking peace including, new leader Timochenko committing to ending kidnapping for ransom as this month old article from the International Crisis Group states:

"Yesterday, the Revolutionary Armed Forces of Colombia (FARC) delivered on its promise to free 10 military and police hostages it had held in the jungle for more than 12 years. FARC has also pledged to abandon its decades-long practice of kidnapping for ransom. (Hundreds of civilians have been held in captivity and scores have lost their lives. According to some organizations, several hundred more are still held captive for ransom.)"

Interestingly the only hostages released to date are those that the FARC categorizes as prisoners of war, i.e. military and police hostages, not civilians that were kidnapped for ransom, which the FARC categorizes as political hostages.

It does bode well for oil companies operating in Colombia's oil zone in the south east in the Amazon basin and near the border with Ecuador which have been long-time conflict hot-spots. But as my Colombian friends tell me only time will tell whether this is a genuine initiative by the FARC or a repeat of their old tricks where they used the peace negotiations held with the Pastrana government to buy time to rearm and recruit.

Should this stop investors from considering in Latin America's new investment hot-spot? I don't think so as the opportunities outweigh the risks.

Disclosure: I am long EC.