Geopolitical Risk and U.S.-Colombia Relations: Impacts on Latin American Security and Agricultural Investments

The U.S.-Colombia relationship in 2025 has been marked by unprecedented volatility, with diplomatic tensions spilling into economic and security domains. These tensions, rooted in ideological clashes over drug policy and sovereignty, have created a high-risk environment for investors in Latin America. This analysis examines how shifting U.S. policies-ranging from sanctions to trade adjustments-have reshaped investment flows in Colombia's security and agricultural sectors, with broader implications for the region.

Security Sector: A Fractured Partnership and Fiscal Uncertainty

The U.S. has long positioned Colombia as a strategic ally in counternarcotics and regional stability. However, under President Gustavo Petro's administration, bilateral cooperation has deteriorated. In 2025, the Trump administration decertified Colombia from U.S. counternarcotics obligations for the first time in 30 years, effectively cutting off $590 million in annual aid. This move, coupled with 25% tariffs on Colombian imports and sanctions targeting officials, has weakened Colombia's security infrastructure.

Defense spending in Colombia rose to $15.1 billion in 2024, a 14% increase, but this growth has been offset by reduced U.S. support. The absence of U.S. aid has left gaps in counterinsurgency operations, allowing armed groups to expand their influence in rural areas. For investors, this instability raises concerns about the sustainability of security investments. A report by the Atlantic Council notes that Colombia's fragmented security environment could deter private sector participation in infrastructure and public services.

The U.S. has also expanded its military footprint in the Caribbean and Pacific, including strikes on suspected drug trafficking vessels near Colombia. While these actions aim to disrupt illicit networks, they risk escalating tensions. Petro has condemned such operations as "acts of murder", warning of retaliatory measures. This adversarial dynamic complicates long-term security partnerships, with U.S. policymakers considering additional tools like sanctions under the Foreign Narcotics Kingpin Act.

Agricultural Sector: Tariffs, Trade Uncertainty, and Resilient Exports

Colombia's agricultural sector, a cornerstone of its economy, has faced dual pressures from U.S. tariffs and domestic policy shifts. In 2025, the Trump administration imposed 25% tariffs on Colombian exports, including coffee and cocoa, with plans to raise them to 50%. These measures, however, have had mixed effects. While the U.S. later eliminated 10% tariffs on certain agricultural goods, benefiting 13% of Colombia's export basket, the broader uncertainty has dampened investor confidence.

Foreign Direct Investment (FDI) in Colombia declined by 15.2% between 2023 and 2024, driven by reduced mining sector investment and regulatory instability. However, non-extractive sectors like agriculture showed resilience, with FDI growing 3.4% in 2024. Exports of plantains, avocados, and limes surged by 46% in the first half of 2025 compared to 2024, despite the 10% tariff. This resilience is partly due to Colombia's diversified trade strategy, with countries like China and the EU absorbing some U.S. market losses.

Yet challenges persist. The U.S. has accused Colombia of failing to curb coca production, threatening further trade restrictions. For small-scale farmers, higher tariffs could erode competitiveness, particularly against South American rivals like Brazil and Argentina. Deloitte's 2025 economic outlook highlights that while Colombia's agricultural GDP grew 8.1% in Q2 2024, private investment remains constrained by fiscal deficits and corruption risks.

Broader Regional Implications and Future Outlook

The U.S.-Colombia rift has reverberated across Latin America. Tariffs on Colombian exports have disrupted supply chains, with ripple effects on regional trade dynamics. For instance, Brazil and Mexico have recalibrated their trade strategies to mitigate U.S. policy risks. Meanwhile, U.S. military interventions in the Caribbean have heightened security concerns, prompting regional governments to prioritize domestic defense spending over U.S.-led initiatives.

Looking ahead, Colombia's 2026 presidential election could mark a turning point. A center-right administration may seek to restore U.S. ties by aligning with Washington's counternarcotics agenda. This shift could unlock renewed aid and investment, particularly in security and infrastructure. However, the Trump administration's reluctance to engage with Petro-evidenced by its decision to avoid a 2026 meeting-suggests that U.S. policy will remain transactional, contingent on Colombia's cooperation.

Conclusion

The U.S.-Colombia relationship in 2025-2026 exemplifies how geopolitical tensions can distort investment flows in critical sectors. While Colombia's security infrastructure faces funding gaps due to U.S. aid cuts, its agricultural sector has demonstrated resilience amid trade uncertainties. For investors, the key risks lie in regulatory volatility and the potential for further U.S. sanctions. Yet opportunities exist for those who can navigate these dynamics, particularly as Colombia's political landscape evolves. As the Atlantic Council notes, the region's economic outlook hinges on whether diplomacy can reassert itself over confrontation.