The British ambassador to Colombia has rushed through an emergency trade pact following the unexpected election victory of a populist outsider whom Donald Trump has publicly praised. The deal, cobbled together over a weekend of frantic negotiations, is designed to protect the estimated £1.2 billion in annual bilateral trade from the volatility that has gripped Colombian markets since the result was announced.
Yields on Colombian sovereign bonds have spiked three percentage points in two days, and the peso has shed 8% against the dollar. Markets are now pricing in a 60% chance of a credit rating downgrade by Moody's or S&P before year end. The ambassador's move is a classic piece of financial diplomacy, buying time for British exporters and investors to hedge their exposure.
But let's not pretend this is a long-term solution. It is a sticking plaster on a haemorrhaging artery. The real question is whether the new president's promised 'Colombia First' policies will unravel the very free trade architecture that has underpinned the country's growth since the peace deal.
British pension funds hold around £400 million in Colombian infrastructure bonds. If those start to wobble, the fallout will be felt in Surrey, not just Bogotá. The Bank of England will be watching the peso's slide with barely concealed unease.
Capital flight is a contagion that shows no respect for borders. For now, the ambassador has done his job: stabilising the ship in a storm. But the Treasury should be drawing up contingency plans.
This emergency trade pact is a lifeline, not a lifeboat.
