Guerrilla peace deal would boost Colombia: Fin Min

Resolving drug issue will boost Colombia: Fin Min

Striking a peace deal with a Colombian guerrilla movement to combat illegal drug trafficking would boost the country's economic growth, its finance minister told CNBC.

Mauricio Cárdenas Santamaria said in an interview with CNBC that Colombia's gross domestic product (GDP) could see a 1-2 percent boost if the government achieves a peace agreement with the Revolutionary Armed Forces of Colombia (Farc).

"Colombia with a peace process…will grow not just at 5 percent, which is the current growth rate, it could grow 1 to 2 percentage points more," Santamaria said.

"That means that if we are now a successful economy, image how successful we will be with peace."

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Farc, which started as a Marxist insurgency group, has been responsible for over half a century of clashes with the Colombian army. It now funds its activities through kidnap ransoms and drug trafficking.

Colombian soldiers leave the place after setting on fire a cocaine processing laboratory
Luis Robayo | AFP | Getty Images

Colombian president Juan Manuel Santos formally began talks with the guerrilla group in October 2012 and is pushing for a resolution quickly as he seeks re-election on May 25. Santos is campaigning on the ticket that he can bring an end to Colombia's age-old drug problem.

The accord is focussing on five points. Santos' government and Farc have reached agreement on the first two points relating to land reform and allowing the army to participate as a political party, something they had been stopped from doing.

One of the other points for discussion is the dismantling of Colombia's illegal drug manufacture. Under the terms, crop substitution has been promoted to counter the growing of coca leaves, which are used in making cocaine. The vast majority Colombia's cocaine is smuggled into the U.S.

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Santamaria is convinced the peace process will achieve the desired results.

"I think we've reached a point of no return which is very good. I think the peace process will continue hopefully it will deliver results and achieve a negotiating solution," he said.

Economy in a 'virtuous circle'

Colombia is expected to see one of the fastest growth rates in South America this year with 4.5 percent GDP expansion compared with the region's 2.3 percent average, according to the International Monetary Fund.

Some emerging markets have seen a sell-off this year after jitters surrounding tensions between Ukraine and Russia as well as a slowdown in the Chinese economy have pushed investors to take money out of certain countries.

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But Santamaria said that while some emerging markets took a hit, Colombia continued to attract investment.

"Part of our success is the vast amount of capital wading (flowing in) from abroad. At times, when other emerging markets are contracting or capital is leaving other emerging countries, Colombia is growing faster and receiving more capital," he said.

"That means more jobs. That means we can give more benefits to the population…so it's a virtuous circle."