Between Alliance and Crisis: How Colombia is Readapting Amid the Current Geopolitical Tension
The U.S.-Colombia diplomatic and commercial crisis of January 2025 was extremely short-lived. The swift and public reactions by President Trump, provoked by President Petro’s refusal to accept two American military planes carrying deported illegal migrants, was de-escalated just as quickly as the Colombian president reversed his initial position.1The threat of tariffs now halted, and U.S. visa issuance resumed in Bogotá.2 There was no substantial impact on the Colombian Peso-U.S. dollar parity.3
But it would be short-sighted to say that this all ended up being a mere anecdote. The saga has highlighted – not just to Colombians, but to the rest of the world – the fragility of the U.S.-Colombia relationship under the Trump and Petro administrations. With nearly 27% of Colombia’s exports going to the U.S. market, and the potential for an increased growth in trade fueled by nearshoring dynamics, the issue jeopardizes Colombia’s value proposition for global investors and many multinational companies.4 They had been cultivated over decades through collaboration with the U.S. and other salient members of the international community in anti-drug, military and commercial endeavors.
In this context, the Trump administration’s emphasis on restrictions and scrutiny of Colombians entering the U.S. until the full implementation of the de-escalatory agreement seems to convey a broader point. Eyes of the world are on Colombia as it still has the opportunity to avoid permanent damage to its strong commercial ties to the U.S.
None of this warrants outright pessimism, though. There are at least three pathways for Colombia to maintain, attract, and safeguard its foreign direct investment and economic growth.
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Securing Legal Stability, Building Trust, and Attracting Partners
Safeguard – The Risk of Revision under the U.S.-Colombia Free Trade Agreement
The Free Trade Agreement (FTA) between Colombia and the U.S., implemented in 2012,5 has been a cornerstone for eliminating tariffs and trade barriers in services, including financial services, and establishing robust frameworks for customs, trade facilitation, e-commerce, intellectual property, and labor and environmental protections.
President Petro’s announcement of an interpretative note to Chapter 10 of this agreement — mandating that disputes be resolved in local courts and effectively eliminating international arbitration as an alternative recourse — sent shockwaves through investors and multinational corporations.6 The timing of the announcement, just four days before Trump’s inauguration,7 further underscored President Petro’s confrontational stance and adversarial rhetoric, setting an early tone for heightened tensions in U.S.-Colombia economic relations.
President Petro claimed that the adjustment aims to “protect Colombia’s judicial sovereignty, ensure fair regulations, and strengthen the national rule of law” by seeking to balance investor protections with national sovereignty, “clarifying criteria” for claims and excluding “illicit investments,” while maintaining “equitable treatment” for foreign investors.8 Critics noted that the move further introduces uncertainty by eliminating key resolution mechanism like international arbitration,9 which have shown to be crucial in building trust, an adequate investor climate and, overall, rule of law. These directly impact key sectors of Colombia’s economy such as oil and gas, mining and infrastructure.
As the FTA survives this adjustment, work needs to be done to restore trust, particularly as investor-state dispute settlement considerations have been considerably weakened. Colombia’s move aligns with a broader regional trend of reassessing trade and investment frameworks amid a shifting political landscape which signals a new wave for other renegotiations.10
As Petro continues to criticize mechanisms like International Centre for Settlement of Investment Disputes (ICSID) for “harming national sovereignty” and “enabling investor challenges to regulatory policies,”11 this stance is being echoed by Bolivia, Ecuador, and Venezuela, which have withdrawn from ICSID and renegotiated arbitration clauses in their trade agreements.12
More broadly, Latin America’s turn toward more protectionist policies, as seen in Brazil and Mexico, signals a rethinking of economic partnerships and trade alliances. As the region reevaluates its economic relationships with major powers like the U.S. or China, as seen in Argentina,13 careful navigation will be required to avoid unintended economic consequences.
Recommendations for businesses: Advocate and protect Colombia’s existing legal framework, foreign direct investment benefits and operational freedom. Current framework includes binding elements that safeguard returns and foster growth between the two nations, despite presidential controversies.
- Multinationals should proactively engage with policymakers, trade organizations, and stakeholders in both Colombia and the U.S. to shape the policy environment and protect their operational interests.
- Companies must strengthen risk frameworks through political risk analysis, legal safeguards, contingency planning, and political risk insurance, while enhancing local compliance and coalition-building to ensure investment stability.
- Monitor the evolution of risks such as an eventual revision of Colombia – U.S Free Trade Agreement is key.
Maintain – Trust with The United States
Colombia might not have been front and center in all nearshoring discussions. But, at least before the recent saga, it had continued to make progress to position itself as a strategic destination for nearshoring in Latin America, driven by significant growth in foreign direct investment (FDI) flows from the U.S. in the last 20 years. Although the existing base is smaller, Colombia is outperforming Mexico, Argentina, and Brazil in U.S.-centric nearshoring in percentage terms.14
After the diplomatic crisis, political challenges have now become more acute and needs to be considered within the conversation of nearshoring strategy and investment climate. Trump’s relations with the Petro administration will continue to be strained, but Republican ties to Colombia’s opposition remain strong,15 and U.S. lawmakers could be watching closely as Colombia enters its electoral campaign in 2026.
Moreover, businesses and investors have an essential role in this dynamic. While intergovernmental relations are critical, companies can engage in proactive conversations with governments, other businesses, and investors to help shape the policy landscape, as shown during the latest diplomatic and commercial crisis, where the private sector helped stabilize the business environment, while ensuring that Colombia’s trade and economic strategies align with the evolving geopolitical context.
Recommendations for businesses: Colombian business associations have now set trust-building as their main priority to enforce existing legal and economic ties. The Colombian Senate has already issued a Resolution to form a “Friendship Group Commission” between the Congress of Colombia and the U.S.16
By having a direct communication channel with American authorities, Colombian businesses will be able to advocate for two main issues which are at risk: the United States’ economic support for Colombia, which was set at US$401 million in 2024,17 and Colombia’s Certification as Partner in Global Counternarcotics Efforts.
The private sector should proactively act on the following:
- Evaluate the results of the Congressional Friendship Group Commission.
- Assess companies’ participation in the trust-building exercise.
- Monitor Colombia’s 2025 Budget and Certification process and key stakeholder reactions to.
Assess – Seek Alternatives, Consider Risks – Strengthen Supply Chain with Latin American Economies
The recent diplomatic crisis has exposed a structural vulnerability in Colombia’s economy: its significant dependence on the U.S. market. In 2023, the U.S. accounted for 27% of Colombian exports and 42% of FDI in the country. However, the recent threat to impose 25% tariffs on Colombian goods highlighted the imbalance in this relationship, as Colombia represented only 0.55% of total U.S. imports during the same period.18 This scenario raises concerns about the future value of local assets, currency stability, and increasing financial risks, even beyond military and anti-drug policy agenda.
Prior to this crisis, Colombia had implemented policies aimed at diversifying its trade destinations and strengthening domestic production, which will eventually represent a fork in the road for Colombia and other Latin America countries (as they would likely continue to escalate tensions with the U.S.).19 In the new geopolitical environment, it is difficult for Colombia to reconcile the notion of strengthening ties with the U.S. and the idea of opening the door to new collaborations to diversify business development and form alliances with nations whose political views align more closely with the current government, even with upcoming 2026 presidential elections. These two options appear mutually exclusive, as deepening relations with one could require severing ties with the other.
The Pacific Alliance — comprising Mexico, Peru and Chile and the Andean Community of Nations (CAN) made up of Bolivia, Ecuador and Peru — offer platforms to expand markets and solidify agreements with Asia-Pacific countries and other regional blocks. For instance, in the decade leading up to 2020, approximately 45,000 Colombian companies exported to the CAN, 47% of which were small and medium-sized enterprises.20
President Petro also mentioned considering joining the BRICS group (Brazil, Russia, India, China, and South Africa),21 a political and economic bloc that challenges U.S. dominance and further risks these bilateral concerns. Discussions about this interest have been ongoing since mid-2024. While Colombia’s desire to join is strengthening, it is still behind other nations that are ahead in the process.
Recently, in response to the crisis, President Petro showed interest in convening Latin American leaders for a special Community of Latin American and Caribbean States (CELAC) meeting on January 30th. Originally called by Honduran President Xiomara Castro at Petro’s request, the meeting aimed to address illegal migration issues and develop regional strategies. However, the meeting was canceled due to a lack of consensus among participants, highlighting Latin America fragmentation and challenges in coordinating joint action in such situations.22
Recommendation for businesses: Despite declarations, the U.S. remains a key influencer of Colombia’s economy and public policy beyond trade. Any alternative would require a long-term policy effort. Striking a balance between diversifying trade partnerships and maintaining strong ties with the U.S. will be essential to achieving sustainable economic growth and a more resilient trade balance in the future. The private sector should Monitor recent developments, including closer ties with Brazil, which could push Colombia closer to formalizing its membership in alliances with non-U.S. partners.
Beyond the Crisis, a Reconfiguration of Supply Chains
Latin America countries are adapting their regulatory frameworks to the current geopolitical and trade landscape. This also means the reconfiguration of usual and unusual stakeholders within this ecosystem and showcases the need to find new channels and champions to deliver key messages. This includes parties outside of the traditional government-to-government channel.
As supply chains undergo transformation, the region must prioritize three key areas: digitalization, the adoption of sustainable practices, and the development of human talent — positioned as the primary driver of change in the Latin America logistics sector.
Given the political and economic uncertainty highlighted by the recent crisis, these elements will be crucial in ensuring long-term supply chain stability and will position Latin America for growth and greater integration into the evolving global trade networks.
However, to ensure the success of these transformations, decision-makers must focus on improving physical and legal security of supply chains, fostering competitive tax environments and an appropriate investor climate, especially in preparation of political and economic uncertainty.
A New Take on How to Do Business in Colombia
Develop Collaborative Agendas: Companies should put wider effort on designing strategies and narratives that highlight the importance of Colombia’s evolving role in the region’s trade reconfiguration through public policies aimed at enhancing corporate adaptation to the changing dynamics. Through strategic partnerships and collaborative agendas, companies will facilitate the revitalization of investment and competitiveness by fostering dialogue with key stakeholders and creating collaborative spaces that drive sustained growth and improved investment climate.
Understand Risk is Also Opportunity: Despite the current political volatility and tensions, Colombia offers an attractive landscape for foreign entrepreneurs and investors committed to sustainable development. By implementing a comprehensive approach that includes macro-level analysis — government, legislation and regulation — and micro-level insights — activism, non-governmental organizations and regional leaders — U.S. and multinational corporations could anticipate risks and trends, ensuring informed decisions.
Response to Adverse Scenarios: Adapting to economic and political challenges requires strategic evaluation backed by proactive planning. In a geopolitical landscape shaped by China’s expansion as a strategic partner, the resurgence of U.S. protectionist policies with Trump’s return, and the transformation of supply chains, companies should seek comprehensive mechanisms to mitigate risks, and safeguard (or in some cases, restore) organizational reputation during crises. This approach ensures timely and effective responses to shifting market dynamics.
To further discuss the insights and recommendations herein, reach out to our experts below.
Authors
Jorge Del Castillo
Managing Director, Colombia Corporate Reputation
Jorge Del Castillo leads FTI Consulting’s Strategic Communications segment in Colombia. With more than 20 years of experience, he advises clients from the public, private and multilateral sectors on reputation protection and enhancement strategies, public affairs, risk mitigation and crisis management.
Juliana Gomez
Senior Director, Colombia Public Affairs
Juliana Gomez is a Senior Director within FTI Consulting’s Strategic Communications segment, based in Bogotá. She specializes in the development and implementation of corporate affairs, public policy, stakeholders’ engagement, crisis management and corporate communication strategies. She helps multinational companies and local conglomerates with operations in Colombia and the rest of the Americas, in sectors such as food and beverage, healthcare and pharmaceuticals, technology and infrastructure, anticipate and mitigate risks to maintain their license to operate.
Mariana Mejia
Director, Colombia Public Affairs
Mariana Mejia is a trained lawyer from the University of the Andes. She specializes in advanced studies of economics and politics and has a master’s degree in journalism.
[1] Gustaf Kilander, Alex Woodward, “Colombia backs down in face of Trump tariff threats over migrants deported on military planes,” The Independent (January 27, 2025), https://www.independent.co.uk/news/world/americas/us-politics/trump-colombia-deportation-flights-immigrants-b2686652.html
[2] Victor Cohen, “US Resumes Visa Issuance for Colombians,” ColombiaOne (January 31, 2025), https://colombiaone.com/2025/01/31/colombians-us-visa/
[3] “Latam Daily: Resolution Between the U.S. and Colombia,” Scotiabank (January 28, 2025), https://www.scotiabank.com/ca/en/about/economics/economics-publications/post.daily-publications.latam-daily.latam-daily.2025-issues.-january-28-2025-.html
[4] Juan Esteban Lewin, “Colombia’s commercial dependence is exposed by the crisis with the United States,” El País (January 27, 2025), https://elpais.com/america-colombia/2025-01-28/la-dependencia-comercial-de-colombia-que-queda-expuesta-por-la-crisis-con-estados-unidos.html
[5] “United States- Colombia Trade Promotion Agreement,” Office of the United States Trade Representative (last accessed February 4, 2025), https://ustr.gov/trade-agreements/free-trade-agreements/colombia-tpa
[6] “Colombia and the US sign an agreement to balance investments in the FTA,” América Economía (January 16, 2025), https://www.americaeconomia.com/en/node/290188
[7] Ibid.
[8] Nick Dearden, “Colombia is defending its sovereignty from the power of global corporations,” Aljazeera (December 25, 2024), https://www.aljazeera.com/opinions/2024/12/25/colombia-is-defending-its-sovereignty-from-the-power-of-global-corporations
[9] Estefania San Juan, Silvia Marchili, Damien Nyer, “On Colombia’s Threatening Rhetoric against ICSID Arbitration and Implications for Foreign Investors,” White & Case (December 12, 2024), https://www.whitecase.com/insight-alert/colombias-threatening-rhetoric-against-icsid-arbitration-and-implications-foreign
[10] “Colombia and the US sign an agreement to balance investments in the FTA,” bilaterals.org (January 16, 2025), https://www.bilaterals.org/?colombia-and-the-us-sign-an
[11] “Colombia will seek to renegotiate articles of FTA with the US and the European Union related to arbitration,” Ámbito Jurídico (November 22, 2024), https://www.ambitojuridico.com/noticias/mercantil/mercantil-propiedad-intelectual-y-arbitraje/colombia-buscara-renegociar
[12] See supra note 9.
[13] Patricio Giusto, “Et tu, Milei? Is Argentina Getting Closer to China Again?,” Wilson Center (September 20, 2024), https://www.wilsoncenter.org/blog-post/et-tu-milei-argentina-getting-closer-china-again
[14] “Nearshoring: a new era of connectivity for Latin America,” J.P.Morgan (last accessed February 4, 2025), https://privatebank.jpmorgan.com/latam/es/insights/markets-and-investing/nearshoring-a-new-era-of-connection-for-latin-america
[15] Santiago Torrado, Juan Diego Quesada, “Uribe, Santos and the business elite: How Colombian leaders came together against Trump’s threats,” El País (January 29, 2025), https://english.elpais.com/usa/2025-01-29/uribe-santos-and-the-business-elite-how-colombian-leaders-came-together-against-trumps-threats.html
[16] “Senate creates a “friendship” commission with the US after the crisis between Petro and Trump,” El Espectador (January 28, 2025), https://www.elespectador.com/politica/senado-creo-una-comision-de-amistad-entre-el-congreso-y-estados-unidos-tras-crisis-entre-petro-y-trump-noticias-hoyi/
[17] Josep Freixes, “US Suspends Financial Aid to Colombia in Sweeping 90-Day Review,” ColombiaOne (January 22, 2025), https://colombiaone.com/2025/01/22/colombia-us-suspends-financial-aid/
[18] See supra note 4.
[19] Jose Carlos Cueto, “How Colombia benefits from joining China’s Belt and Road (and the many megaprojects already financed by the Asian power),” BBC (November 11, 2024) https://www.bbc.com/mundo/articles/c89l979d3d7o.
[20] “Faced with the challenge of economic reactivation in the region, Colombia takes the helm of the Andean Community,” Ministry of Industry and Trade of Colombia (July 8, 2020), https://www.mincit.gov.co/prensa/noticias/comercio/colombia-toma-el-timon-de-la-comunidad-andina
[21] Hugo Caro Jimenez, “After the clash between Gustavo Petro and Donald Trump, what can we expect?,” France24 (January 27, 2025), https://www.france24.com/es/am%C3%A9rica-latina/20250127-despu%C3%A9s-del-choque-entre-gustavo-petro-y-donald-trump-qu%C3%A9-esperar
[22] “Latin American migration summit off as leaders tread carefully with Trump,” France24 (January 29, 2025), https://www.france24.com/en/live-news/20250129-latin-american-migration-summit-off-as-leaders-tread-carefully-with-trump
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