A political earthquake in Bogotá has sent ripples through the City. The unexpected victory of a Trump-endorsed outsider in Colombia’s presidential election has left markets digesting the implications for trade, capital flows, and regional stability. For London, the immediate priority is clear: secure a new bilateral trade deal before the US tightens its grip.
The new president, a populist firebrand who campaigned on a platform of deregulation and resource nationalism, defied all polls. His victory speech promised to “drain the swamp” and renegotiate all international agreements. But the real story for investors is what this means for Colombia’s vast natural resources, from oil to emeralds. The country’s peso has already rallied on expectations of a more business-friendly environment, but the sustainability of this move is questionable.
As Chief Financial Editor at The Daily Telegraph, I have seen this before. Elections in Latin America often trigger a knee-jerk surge in risk appetite, followed by a sobering dose of reality. The new leader’s ties to the previous administration’s debt accumulation are a red flag. Colombia’s fiscal deficit is already above 5%, and gilt yields in London are watching nervously. If he embarks on a spending spree, we could see a repeat of the 2014 market rout.
However, the real prize is a trade deal with the UK. Since Brexit, London has been aggressively pursuing commercial agreements beyond the European Union. Colombia, with its growing middle class and low labour costs, offers an ideal partner for everything from financial services to infrastructure. The City’s eyes are on sectors like fintech and renewable energy, where British firms can provide expertise in exchange for market access.
The risk is that the new president’s nationalist rhetoric might scare off investors. His campaign promises to curb foreign ownership in strategic industries could deter capital flows. But if he follows the Trump playbook, he will soon realise that protectionism is a terrible negotiating tactic. The UK must move quickly, offering a comprehensive deal that locks in tariff-free access before protectionist drift sets in.
Market volatility is the key theme here. The Colombian peso’s initial surge will likely be short-lived. Inflation is creeping up, and the central bank is under pressure to raise rates. This could spell trouble for leveraged positions. Investors should hedge their exposure to Colombian bonds and equities. The direction of travel is clear: this is a high-risk, high-reward play. London’s traders are already pricing in a risk premium.
For the UK Treasury, this is a moment of opportunity and caution. They must balance the need for a swift deal with the risks of overpaying in concessions. The new president knows he holds the cards, and every concession the UK makes will be scrutinised by his base. The smart play is to focus on mutual benefit not political grandstanding. The City remembers the lessons of the post-crisis era: fiscal responsibility is a virtue, and market discipline is unforgiving.
In the coming weeks, I expect a flurry of diplomatic activity. The new Colombian administration will receive delegations from London, Washington, and Beijing. Each will offer a vision of partnership. If the UK can secure a preferential deal underpinned by robust governance standards, it will be a feather in the cap of post-Brexit trade policy. If not, the consequences could be higher long-term borrowing costs and a missed opportunity to diversify trading links.
Investors should watch three things: first, the new government’s first budget for signs of fiscal rectitude; second, the pace of central bank tightening; and third, the signals from the White House. If Trump sees this as a test of his influence, he may push for a US-first deal, leaving Britain scrambling. The next 90 days will determine whether Colombia embraces commercial openness or succumbs to nationalist isolationism. Either way, the City will adapt, but the bets are on volatility, not stability.
