The City of London has been watching Colombia’s presidential election with growing unease. The run-off between Gustavo Petro, a former Marxist guerrilla, and Rodolfo Hernández, a populist billionaire often compared to Donald Trump, threatens to upend a trade relationship that has quietly yielded dividends for British exporters and investors. For decades, Colombia has been a steady if unspectacular partner: a source of oil, coal, coffee, and a market for British financial services and manufactured goods. But the political polarisation now on display in Bogotá raises the risk of capital flight, currency turmoil, and policy flip-flops that could spook the markets.
Let’s start with Petro. If he wins, expect a sharp leftward shift. He has promised to halt new oil exploration, renegotiate free trade agreements, and raise taxes on the wealthy. For British energy giants like BP and Anglo American, which have significant operations in Colombia, that is a red flag. Oil accounts for nearly half of Colombia's exports, and a freeze on drilling would hit both government revenues and foreign investment. The British pound may not be directly exposed, but the Colombian peso would almost certainly weaken, making it harder for UK importers to pay for goods and for Colombian firms to service dollar-denominated debt.
Then there is Hernández. He is a wild card: a construction magnate who built a fortune on DIY stores and provincial development. His platform is a jumble of anti-corruption rhetoric, tax cuts, and social spending increases that look mathematically impossible. Fiscal discipline? Not his strong suit. The markets hate uncertainty, and Hernández’s improvisational style could spook investors just as much as Petro’s socialism. The key risk here is sovereign debt. Colombia’s credit rating has already been downgraded to junk by Fitch. A Hernández presidency might trigger a further downgrade if he fails to present a credible fiscal plan.
What does this mean for Britain? Trade volumes are modest about £1.2 billion in bilateral goods trade last year but there are strategic interests. The UK signed a trade continuity agreement with Colombia in 2019, preserving access after Brexit. British banks, insurers, and legal firms have a growing presence in Bogotá and Medellín. A destabilised Colombia would hurt these firms directly. Worse, it could undermine the broader UK-Latin America trade strategy, which sees Colombia as a gateway to the Pacific Alliance. If Colombia veers off course, British exporters lose a foothold.
Inflation is another headache. Colombia is already battling double-digit inflation, partly due to global energy prices. A Petro victory might prompt capital controls, while a Hernández win could lead to reckless spending. Either way, the central bank will have to tighten monetary policy, slowing growth and reducing demand for British exports. The Bank of England, already struggling with its own inflation problem, does not need turbulence in emerging markets to complicate the outlook.
Gilt yields, the barometer of British government borrowing costs, could also feel the heat. If global investors flee Colombian assets, they may seek safe havens like US Treasuries or German Bunds, but UK gilts could suffer if the crisis prompts a general emerging market sell-off. The correlation is not perfect, but in a panic, all risky assets sink together. A 100 basis point rise in gilt yields would add billions to the UK’s debt servicing costs exactly what the Treasury does not need.
Let’s not forget the capital flight risk. Wealthy Colombians have long parked money in London property and British bank accounts. A contested election or a victory by either radical candidate could accelerate that outflow. That is good for British banks but bad for Colombia’s foreign exchange reserves. And if the peso collapses, British firms with local earnings will see their profits evaporate.
The bottom line: Colombia’s election is not just a local drama. It is a test of whether Latin America can maintain its embrace of free markets and fiscal prudence. For the UK, the stakes are clear. Roll the dice with Petro or Hernández, and British trade ties face a period of disruption that neither the City nor Whitehall can afford. Investors should buckle up.
