In one of the biggest surprises over the weekend, Colombians went to the polls on Sunday to participate in a Yes/No referendum on a recently signed historic peace deal with the FARC leftist guerrilla movement to end more than 50 years of armed conflict (which started in 1964).

As Goldman writes, the campaign was highly polarized and perhaps as a resul, the final referendum result was very tight and in the opposite direction of early poll indications. Close to final results (with the votes of 99.5% of the precincts tallied) show that the No camp won the referendum with a razor-thin 50.2% of the vote compared to 49.8% for the Yes camp. The rejection of the proposed peace deal was not expected nor discounted by the market as recent polls had indicated a roughly 2-to-1 Yes-No margin.

Putting on a brave face after a major political defeat, President Juan Manuel Santos offered hope to those who backed his four-year peace negotiation with the Revolutionary Armed Forces of Colombia (FARC) in Cuba. Latin America's longest conflict has killed 220,000 people. "I will not give up, I will keep seeking peace until the last minute of my term," he said moments after losing Sunday's plebiscite to those who want a re-negotiation of the deal or an obliteration of the FARC on the battlefield.



A woman cries after finding out the results of a referendum

Santos stated before the referendum that a No vote would mean a return to armed conflict. The victory of the No vote, according to GS, shows:

the limited political capital of President Santos, who appears to have spared no effort over the last four years negotiating the proposed peace deal; and simultaneously the significant political capital of former President Uribe, who openly campaigned against an agreement he considered to be unfair and too soft on the guerrilla movement; and how deeply unpopular the guerrilla movement is in a country that has been ravaged by five decades or armed conflict.

The victory of the No camp is likely to render Colombia's domestic political picture even more complex and could impact the tax proposal the government was expected to announce soon after the referendum. It is also unclear what will happen to the negotiated peace deal, the envisaged demobilization of roughly 7,000 FARC fighters, the planned conversion of the FARC into a political party, and whether the two parties will try to renegotiate the deal (which may not be the most obvious immediate course of action as both President Santos and FARC have rejected the idea of returning to the negotiating table if the deal was not validated in the referendum).

As such, Goldman said it expects financial markets to react negatively on Monday with the COP and local interest rates likely to sell off. A weaker COP and political uncertainty created by the No camp victory is likely to limit room for the monetary authority to cut rates in the near term.

Meanwhile, according to Reuters, Colombia's government and Marxist FARC guerrillas will scramble on Monday to revive a plan to end their 52-year war after voters rejected the hard-negotiated deal as too lenient on the rebels in a shock result that plunged the nation into uncertainty.

Santos plans to meet all political parties on Monday and send lead government peace negotiator Humberto de la Calle back to Havana to speak to the FARC leadership. Rodrigo Londono, the top FARC commander better known by his nom de guerre Timochenko, also offered reassurance the rebels remain committed to becoming a peaceful political party. "The FARC reiterates its disposition to use only words as a weapon to build toward the future," Timochenko said after the result. "Count on us, peace will triumph." Santos, 65, who was not obliged by law to hold a plebiscite, had said there was no Plan B for the failure of the peace vote, but now appears ready to consider options.

In some ways the outcome is similar to the Brexit vote, as Colombians, even those who backed the "No" vote, expressed shock at the outcome and uncertainty about the future. "We never thought this could happen," said sociologist and "No" voter Mabel Castano, 37. "Now I just hope the government, the opposition and the FARC come up with something intelligent that includes us all."

The peace accord reached last month and signed a week ago offered the possibility that rebel fighters would hand in their weapons to the United Nations, confess their crimes and form a political party rooted in their Marxist ideology.

If there is a silver lining in what appears to be a return to the historical hostilies, is that as Paul Krugman would promptly agree, the war-based boost to the country's GDP is set to continue in the coming months because nothing breaks windows better, and more pointlessly, than continued fighting and suffering.