Colombia Becomes a Latin American Star

Aerial view of a city in Colombia. Ricardo Maldonado / EPA-Landov

In a time of emerging-market juggernauts, Colombia gets little notice. Its $244 billion economy is only the fifth-largest in Latin America, a trifle next to Brazil, the $2 trillion regional powerhouse. Yet against all odds Colombia has become the country to watch in the hemisphere. In the past eight years the nation of 45 million has gone from a crime- and drug-addled candidate for failed state to a prospering dynamo. The once sluggish economy is on a roll. Oil and gas production are surging, and Colombia's MSCI index jumped 15 percent between January and June, more than any other stock market this year.

This is more than a bull run. Since 2002, foreign direct investment has jumped fivefold (from $2 billion to $10 billion), while GDP per capita has doubled, to $5,700. The society that once was plagued by car bombs, brain drain, and capital flight is now debating how to avoid "Dutch disease," the syndrome of too much foreign cash rolling in. Stable, booming, and democratic, Colombia has increasingly become "a bright star in the Latin American constellation," as emerging-market analyst Walter Molano of BCP Securities calls it. Michael Geoghegan, CEO of HSBC, recently picked Colombia as a leader of a nascent block of midsize powers, the CIVETS (after the smallish, tree-dwelling cat), which stands for Colombia, Indonesia, Vietnam, Egypt, Turkey, and South Africa. "These are the new BRICs," he said.

There is something else that is now separating Colombia from the rest of the pack: in a region known to swoon for chest-thumping autocrats like Venezuela's Hugo Chávez, and populist charmers like Cristina Fernández de Kirchner of Argentina, this nation has come to rely not on personalities but on institutions grounded in the rule of law. Exhibit A: the election of Juan Manuel Santos as president. A former defense minister known as a technocrat, he labored for years in the shadows of his predecessor, Álvaro Uribe, the massively popular and seemingly irreplaceable leader. Uribe's hardline policies against drugs and thugs rescued the nation from almost certain ruin, and his 70 percent–plus approval rating seemed to go to his head. But his aggressive, if undeclared, attempts to lobby the Congress and the courts to change the Constitution to allow him to run for a third term grated on the Colombian elite. Against all predictions, the Constitutional Court turned down Uribe's reelection bid, a show of institutional nerve that struck a chord in a region still populated by tone-deaf leaders. "Can you imagine the Argentine courts saying no to Cristina Kirchner?" says Johns Hopkins's Latin America scholar Riordan Roett of the populist Argentine president, who often has bullied the courts and cowed Congress into submission.

But saying no to Uribe was hardly an automatic s' for Santos. Low-key and bureaucratic, Santos was often dismissed as a ventriloquist's doll with no script of his own. Instead, pundits and pollsters touted the rise of Antanas Mockus as the new face of Colombian politics. It turned out that Colombians were not looking for personalities but continuity. Tellingly, all the half-dozen or so serious candidates ended up endorsing the basics of the Colombian equation: security, the free market, and a rules-based democracy. Mockus himself at times sounded more hawkish than Uribe, trumpeting his crime-busting credentials as mayor of Bogotá and vowing to give no quarter to guerrillas and terrorists. Voters apparently wanted the original policies, not a copy, and, absent Uribe, went for the man who made Uribismo work. Santos garnered a record 9 million votes, a triumph larger even than his predecessor's 2006 landslide. "Whether on security, democratic stability, or vibrancy, the strength of Colombia's democracy is there for all to see," says Eric Farnsworth, vice president of the Council of the Americas.

Santos makes an unlikely warrior. He is the scion of a powerful Colombian family—his great-uncle was president (1938–1942), and for decades his relatives controlled the country's largest media group, El Tiempo. Santos trained as an economist at Harvard and at the London School of Economics. Before Uribe, he served as trade minister and then as finance minister, sponsoring tough pension and tax reforms and slashing government spending to beat one of Colombia's worst recessions on record. But it was in defense, where he executed Uribe's iron-fisted "democratic security" policy, that Santos made his mark, shedding the image of a bureaucrat. He launched precision raids on guerrilla outposts, including a predawn strike on a FARC encampment in the jungles of neighboring Ecuador, in 2008. That attack flared into a diplomatic incident in the Andes but also killed a top FARC commander, known by his nom de guerre, Raúl Reyes. In 2009 his security forces also rescued several of the guerrillas' trophy hostages, such as former presidential candidate Ingrid Betancourt.

Grateful as voters are, that war is not over. The guerrilla groups, though down, have not been routed, and street crime has spiked in Medellín and Cali. Some 3 million to 4 million people are said to be homeless after years of clashes between security forces, paramilitaries, and narcotraficantes. And while the economy is growing again (at 4.4 percent a year), Santos inherits the second-highest rate of unemployment on the continent (12 percent); 45 percent of the population under the poverty line (17 percent in extreme poverty); and a cold war with neighboring Venezuela that has crippled relations with Colombia's biggest trading partner after the U.S.

No one seems more aware of the challenge than Santos. While praising Uribe, Santos quickly sought to distance himself from his prickly mentor with a coded message of truce. Barely had the votes been counted when he announced a government of national unity and named job creation, fighting poverty, and building houses as his priorities, while also rebranding the government's master policy from democratic security to one of democratic prosperity. And even as he declared that he and Chávez were like "oil and water," he made a clear peace gesture to the Venezuelan leader by naming Maria Angela Holguin, a former ambassador to Caracas, for the delicate job of foreign minister.

Can Santos turn Colombia's prestige into international cachet? Until now, his countrymen have been too consumed by internal battles to look much beyond the border, and Colombia has neither the wealth nor the clout to rival Brazil, where the charismatic President Luiz Inácio Lula da Silva is still sopping up all the diplomatic limelight in Latin America. But while the neighborhood colossus seems bent on punching under its weight by courting tyrants (like Iran's Mahmoud Ahmadinejad) and keeping Western nations at arm's length, Colombia is gaining kudos and clout. Prospering, democratic, and pro-Western—and with a new leader known more for his achievements than for his aura—the most conflicted nation in the hemisphere is now coming into its own.