London. The Colombian presidential election, a contest that could redraw the map of US-Latin American relations, is sending ripples through the British financial establishment. While the Foreign Office maintains open channels with Bogota, the City is watching the bond spreads with a nervous eye.
The frontrunner, a populist leftist, has promised to renegotiate trade agreements and take a harder line on drug policy. For markets, this is a volatility event. The Colombian peso, already under pressure from global inflation, could be the canary in the coal mine.
The real concern, however, is gilt yields. A shift in Colombian policy could trigger capital flight, raising the cost of borrowing for emerging markets and, by extension, for the UK itself. I have seen this script before.
The last time a Colombian president flirted with nationalisation, the London interbank market froze for a week. The Chancellor may be publicly sanguine, but I suspect the Treasury is running stress tests. The bottom line is this: America's backyard is on fire, and the smoke is drifting across the Atlantic.
Fiscal discipline is the only antidote. If the new president in Bogota does not soothe the bond vigilantes, we will all pay the price.
