Colombia's Political Turmoil: A Cautionary Tale for Emerging Markets Investors

The assassination attempt on Senator Miguel Uribe Turbay—a far-right presidential hopeful and vocal critic of President Gustavo Petro—on June 7, 2025, has thrust Colombia's fragile political stability into the spotlight. This brazen attack, reminiscent of the violent 1980s-1990s era, underscores the deepening polarization between Colombia's left and right, and raises critical questions about the risks facing emerging market investors. With elections looming in 2026 and armed groups expanding their reach, Colombia's equity markets face mounting headwinds tied to geopolitical uncertainty.

Political Polarization and the Shadow of Violence

Uribe's near-fatal attack—carried out by a 15-year-old hitman—has reignited fears of a return to political violence. The incident occurred against a backdrop of escalating rhetoric between Petro's leftist government and the opposition, led by figures like Vicky Dávila. U.S. Secretary of State Marco Rubio has openly criticized Petro, alleging his rhetoric has emboldened violence. Meanwhile, Petro's “total peace” strategy has failed to curb armed groups like the ELN, FARC dissidents, or the Gulf Clan, which now operate in 55% more municipalities than in 2022. This failure has displaced over 121,000 people by July 2024 alone.

The 2026 presidential race is already heating up, with candidates demanding international protection plans—a stark reminder of the 1989 assassination of Luis Carlos Galán, which triggered a decade of chaos. Such instability could deter foreign investors, who account for 35% of Colombia's equity market capitalization.

Economic Consequences: Between Sanctions and Social Unrest

Colombia's economy is caught between domestic turmoil and external pressures. The U.S. has tied trade policies to anti-drug efforts, threatening tariffs if cartels like the Sinaloa Cartel remain unchecked. Meanwhile, Petro's government faces criticism for its handling of human rights—138 social leaders were killed in 2024—and displacement crises, which have prompted the Constitutional Court to declare an “unconstitutional state of affairs.” These issues could trigger protests, as seen in neighboring Argentina and Ecuador, further destabilizing markets.

Investors must also weigh Colombia's positive indicators: its ratification of the Escazú Agreement (2024) and UN Human Rights Council membership (2025–2027) signal diplomatic progress. However, deforestation rates rose 40% in early 2024, and implementation of peace accords lags, eroding trust in governance.

Implications for Emerging Markets

Colombia's situation serves as a microcosm of broader risks in emerging markets. Geopolitical instability—whether from political violence, weak institutions, or external sanctions—can quickly escalate, deterring capital flows. Investors in other Latin American markets, such as Brazil or Peru, should monitor Colombia's trajectory as a warning sign. Sectors like mining, energy, and banking, which rely on stability, may face heightened volatility.

Investment Strategy: Navigating the Crossfire

1. Avoid Overexposure to Equity Markets: Colombia's IGBC Index has shown significant volatility compared to regional peers. Consider reducing equity stakes unless political risks subside.
2. Focus on Defensive Sectors: Utilities and infrastructure projects with government backing (e.g., energy grid modernization) may offer resilience against unrest.
3. Monitor U.S.-Colombia Trade Dynamics: A could signal near-term pressures.
4. Consider Hedging with Currency Derivatives: The Colombian peso's volatility (up 8% against the dollar YTD 2025) may warrant hedging for USD-denominated investors.

Conclusion: A Testing Ground for Resilience

Colombia's 2025 turmoil highlights the fragility of emerging markets reliant on political stability. For investors, the lesson is clear: geopolitical risks demand rigorous risk management. While Colombia's long-term fundamentals—youthful population, resource wealth—remain attractive, the path to realizing value is fraught with pitfalls. Until the peace process is revitalized and polarization eases, emerging market portfolios should prioritize diversification and caution.

In the words of one trader: “Colombia's markets are now a litmus test—proof that in emerging economies, politics is the ultimate driver of returns.”