Assessing Geopolitical Risks and Opportunities in Latin American Energy Markets Amid Trump-Petro Dynamics

The U.S.-Colombia relationship has become a flashpoint in Latin America's energy landscape, with far-reaching implications for regional stability and U.S. energy strategy. Under President Donald Trump's second term and Colombian President Gustavo Petro's tenure, bilateral tensions have escalated to unprecedented levels, reshaping trade dynamics, security cooperation, and energy partnerships. This analysis examines how the Trump-Petro rift is driving U.S. energy strategy shifts, the resulting geopolitical risks, and emerging opportunities in a region increasingly defined by competing alliances and resource competition.

The Trump-Petro Rift and Its Impact on Colombia's Energy Sector

The deterioration of U.S.-Colombia relations began with Petro's refusal to accept deportees from the U.S., prompting retaliatory 25% tariffs on Colombian imports and sanctions targeting Petro and his inner circle. Trump's administration further decertified Colombia in 2025 for failing to meet counternarcotics obligations, cutting off $590 million in aid and exacerbating domestic instability. Petro's "Total Peace" policy, which prioritized negotiations with armed groups over traditional security measures, led to a surge in coca cultivation-accounting for 67% of global production by 2023-and increased violence.

Colombia's energy sector has borne the brunt of these tensions. Petro's administration imposed a scalable surcharge on oil exports and a 1% levy on oil sales, deterring foreign investment and reducing hydrocarbon production to 714,246 barrels per day in April 2025-the lowest since 2021. Natural gas output also fell by 19% year-over-year, threatening Colombia's position as South America's third-largest oil producer. Regulatory uncertainty and Petro's alignment with China have further complicated U.S. efforts to secure regional energy partnerships, with Colombia pivoting toward non-traditional allies amid deteriorating relations.

U.S. Energy Strategy Shifts in Latin America

As U.S.-Colombia ties fray, the Trump administration has recalibrated its energy strategy to focus on alternative partners in the region. Venezuela's vast oil reserves-303 billion barrels of proven reserves-have become a strategic priority, with the U.S. military intervening to install interim leadership and secure access to the country's energy infrastructure. Trump's administration has outlined plans for U.S. firms like Chevron to invest billions in Venezuela's oil sector, framing the move as a means to counter Chinese and Russian influence while revitalizing U.S. energy dominance.

Mexico and Canada have also emerged as key partners in this realignment. Trump's 25% tariff on Mexican oil imports and 10% tariff on Canadian energy exports reflect a broader strategy to prioritize U.S. energy exports to Latin America while reducing reliance on foreign imports. Mexico's upcoming transition from Andrés Manuel López Obrador to Claudia Sheinbaum is expected to accelerate renewable energy development, aligning with U.S. interests in decarbonization and infrastructure modernization. Meanwhile, Brazil's leadership in hydrogen production and offshore wind projects positions it as a critical ally in the region's energy transition.

Regional Stability and Geopolitical Implications

The Trump-Petro dynamics have introduced significant volatility into Latin America's energy markets. U.S. military interventions in Venezuela and threats of aggression against Colombia have heightened fears of regional instability, with neighboring countries like Brazil and Ecuador navigating shifting alliances. Petro's alignment with Venezuela's socialist regime and China's growing influence in the region have further complicated U.S. efforts to maintain hegemony, prompting a fragmented landscape of partnerships.

The U.S.-China competition for critical minerals-such as lithium, copper, and nickel-adds another layer of complexity. Latin America, home to 60% of the world's lithium reserves and 40% of copper production, is a focal point for this rivalry. China's Belt and Road Initiative (BRI) has facilitated its dominance in lithium projects across the region, while the U.S. has countered with the Inflation Reduction Act (IRA) and stricter foreign investment regulations. This competition risks exacerbating resource nationalism and environmental degradation, particularly in countries like Bolivia and Chile, where state control over mineral resources is intensifying.

Opportunities in Renewable Energy and Regional Integration

Despite the geopolitical turbulence, Latin America's energy transition presents compelling opportunities for investors. The region already generates over 60% of its electricity from renewables, with solar and wind capacity expanding rapidly. Colombia's offshore wind auction in 2025 and Brazil's first battery energy storage system (BESS) auction signal a commitment to diversifying energy portfolios. U.S. partnerships in green hydrogen and renewable infrastructure could further solidify regional stability by reducing dependence on fossil fuels and enhancing energy security according to research.

However, success hinges on addressing infrastructure gaps and political volatility. High transmission losses (17% in some countries) and outdated systems pose challenges, while geopolitical tensions could disrupt supply chains. Investors must also navigate the dual reliance on fossil fuels for economic growth and the need to decarbonize, a balancing act that requires robust policy frameworks and international financing.

Conclusion

The Trump-Petro rift has redefined U.S. energy strategy in Latin America, driving a pivot toward Venezuela, Mexico, and Brazil while deepening rivalries with China. While these shifts introduce risks-such as regional instability and resource competition-they also create opportunities in renewable energy and critical mineral supply chains. For investors, the key lies in hedging against geopolitical volatility while capitalizing on the region's transition to cleaner energy. As Latin America's energy landscape evolves, strategic partnerships and adaptive policies will be critical to navigating this complex terrain.