A broken peace sign mending into a landscape representing economic prosperity.

Peace Agreements: Why They Sometimes Fail to Deliver Economic Prosperity

Soraya Malik in Global Affairs August 2025 • 4 min read.

"Despite reducing violence, peace agreements often fall short of sparking economic growth. Discover the crucial factors for lasting stability and prosperity in post-conflict regions."

In an era marked by a resurgence of global armed conflicts, the need for effective and lasting peace agreements has never been more critical. While these agreements represent a crucial step towards ending hostilities, their ultimate success hinges on their ability to foster economic recovery and development in war-torn regions.

A recent study delves into the economic impact of Colombia's 2016 peace agreement between the government and the Revolutionary Armed Forces of Colombia (FARC), aiming to understand why, despite a significant reduction in violence, many conflict-affected areas have not experienced the anticipated economic boom. This investigation uncovers the critical role of state capacity in translating peace into tangible economic benefits.

By examining various economic indicators and employing rigorous analytical methods, the research sheds light on the complex interplay between peace, security, and economic development, providing valuable insights for policymakers and peacebuilders worldwide.

Colombia's Peace Dividend: A Promise Unfulfilled?

A broken peace sign mending into a landscape representing economic prosperity.

The 2016 peace agreement in Colombia marked the end of a protracted and violent conflict, raising hopes for a new era of economic prosperity, especially in regions historically controlled by the FARC. The agreement aimed to integrate these marginalized areas into the national economy through rural development programs and increased state presence. However, the anticipated economic boom has largely failed to materialize.

The study uses a difference-in-difference strategy, comparing municipalities formerly under FARC control with those under the influence of another guerrilla group, the ELN. The analysis reveals a significant reduction in violence in FARC-controlled areas following the agreement, but surprisingly, little to no improvement in key economic indicators.

Economic Indicators Stagnant: Despite decreased violence, measures such as value added, nighttime light intensity, agricultural productivity, and firm entry showed no significant gains.
Targeted Programs Ineffective: Government programs designed to stimulate economic activity in conflict zones also failed to generate noticeable improvements.
Lack of State Capacity: The primary reason identified was the absence of sufficient state capacity in FARC-controlled areas, hindering their ability to capitalize on the newfound peace.

These findings underscore that merely reducing violence is insufficient for achieving lasting economic recovery in post-conflict settings. Complementary investments in state capacity, including governance, infrastructure, and public services, are essential for unlocking the economic potential of peace agreements.

Investing in State Capacity: The Key to Unlocking Economic Peace

The study's findings carry critical implications for Colombia and other nations grappling with post-conflict reconstruction. They highlight the necessity of prioritizing investments in state capacity to ensure that peace agreements translate into tangible economic benefits for affected communities. Strengthening governance, improving infrastructure, and expanding access to public services are vital steps towards fostering sustainable development and preventing the resurgence of conflict.

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Everything You Need To Know

Why do peace agreements, such as the one in Colombia with the FARC, sometimes fail to produce expected economic benefits?

Peace agreements, like the Colombia's 2016 peace agreement with the FARC, often fall short of delivering economic prosperity despite reducing violence because the absence of sufficient state capacity hinders the ability to capitalize on the newfound peace. The anticipated economic boom has largely failed to materialize because merely reducing violence is insufficient for achieving lasting economic recovery in post-conflict settings. Complementary investments in state capacity, including governance, infrastructure, and public services, are essential for unlocking the economic potential of peace agreements. These factors are important for translating peace into tangible economic benefits for affected communities and preventing the resurgence of conflict.

What specific economic indicators were examined in the study of Colombia's peace agreement, and what did they reveal?

The study of Colombia's 2016 peace agreement examined measures such as value added, nighttime light intensity, agricultural productivity, and firm entry. The analysis revealed that despite a significant reduction in violence in FARC-controlled areas following the peace agreement, there were little to no significant gains in these key economic indicators. Government programs designed to stimulate economic activity in conflict zones also failed to generate noticeable improvements. These findings suggest that reducing violence alone is not enough to stimulate economic growth in post-conflict regions.

What does 'state capacity' mean in the context of post-conflict economic recovery, and why is it so important according to the study?

In the context of post-conflict economic recovery, 'state capacity' refers to the ability of the government to effectively administer and govern a region. This includes strengthening governance, improving infrastructure, and expanding access to public services. The study of Colombia's peace agreement with the FARC found that the absence of sufficient state capacity in FARC-controlled areas was the primary reason why the anticipated economic boom failed to materialize. Complementary investments in state capacity are essential for unlocking the economic potential of peace agreements and for fostering sustainable development.

How did the study evaluate the economic impact of the peace agreement between the government and the Revolutionary Armed Forces of Colombia (FARC)?

The study employed a difference-in-difference strategy, comparing municipalities formerly under FARC control with those under the influence of another guerrilla group, the ELN. This method allowed researchers to isolate the impact of the peace agreement on FARC-controlled areas by comparing their economic performance to a control group. By examining various economic indicators and employing rigorous analytical methods, the research sheds light on the complex interplay between peace, security, and economic development.

What are the key implications of the study's findings for other countries emerging from conflict, and what steps should they prioritize?

The study's findings carry critical implications for other nations grappling with post-conflict reconstruction. It highlights the necessity of prioritizing investments in state capacity to ensure that peace agreements translate into tangible economic benefits for affected communities. Other countries should prioritize strengthening governance, improving infrastructure, and expanding access to public services. These steps are vital towards fostering sustainable development and preventing the resurgence of conflict in war-torn regions. Investing in state capacity is the key to unlocking economic peace.