A new analysis by the British consulting firm Oxford Economics has brought to the table the potential effects of a hypothetical complete withdrawal of U.S. economic aid to Colombia. The report suggests that, in the short term, the impact on the national economy would be limited. However, it warns that the risk to medium- and long-term stability and growth should not be underestimated.
According to the document, the current aid the United States channels to Colombia represents approximately 0.2% of the gross domestic product (GDP). Compared with a fiscal deficit estimated at around 7.1% of GDP this year, the loss of that volume of direct assistance would be considered “manageable.” In this regard, Oxford Economics concludes that, from a strictly fiscal perspective, Colombia would have the capacity to absorb that shock without triggering an immediate crisis.
In practice, this means that government budgets would not be dramatically destabilized by the withdrawal of aid — at least not automatically — since the volume is small compared to overall public finances.
Oxford Economics downplays the impact of ending US aid to Colombia
Although the direct economic impact appears moderate, the report projects that the main concern lies in the strategic and structural implications that a deeper rupture in the bilateral relationship could generate.
First, it raises alarms about security and defense. Colombia has partly depended on U.S. support for anti-narcotics programs, security assistance, and international cooperation. Oxford Economics warns that the loss of such support would reduce the Colombian state’s capacity to confront insurgencies, drug trafficking, and areas affected by violence.
That loss of capacity — though not immediate in its entirety — has the potential to slow regional development, affect private investment, and generate new social and governance costs.
Second, the report notes that the risk is higher in sectors most exposed to international trade with the United States. Colombia exports around 4% of its GDP to that country — and much of those exports consist of goods such as flowers, coffee, coal, gold, and oil.
If high tariffs were imposed — for instance, a 50% increase similar to the one the U.S. imposed on Brazil — nonenergy exports could drop by up to 3%, equivalent to a reduction of about 0.5% of GDP. The most vulnerable products would be flowers and coffee, which face logistical challenges, perishability, and competition from other countries that could take their place in the U.S. market.
In addition, markets have reacted nervously to the uncertainty: Exchange rate fluctuations of up to 2% in a single day, and rising yields on Colombia’s sovereign bonds. These fluctuations indicate that, although the economic structure is robust, the combination of external risks and political tensions creates vulnerability.
Growing unease and Colombia’s medium- to long-term outlook
The tension stems not only from macroeconomic figures but also from the emerging political-diplomatic environment. Threats of total aid cuts or new tariff barriers reinforce a climate of uncertainty.
The Oxford Economics report stresses that, although the baseline scenario is a diplomatic resolution that avoids extreme measures, the risk of escalation remains. For Colombia, this means that the greatest impact may not be aparent in the coming months, but later on, as the lack of cooperation or assistance reduces the state’s ability to address security, rural areas, or development programs.
Moreover, the loss of competitiveness in certain export sectors (flowers, coffee) could translate into lower income, employment, and productive restructuring — something that, under current tariff conditions, has not yet occurred, as pressure remains lower than that by Colombia’s main competitors.
Another factor is that persistent uncertainty could raise borrowing costs, affect foreign investment inflows, and slow the economy in the medium term. In this sense, the combination of a more volatile global economy, tense bilateral relations with the United States, and constrained domestic policy could lead to a less favorable medium-term growth environment.
On this point, the report warns that the “window of vulnerability” is not today, but rather expands over the coming years, when Colombia’s growth and institutional fundamentals will be put to the test.
How can Colombia mitigate the economic risks?
Although the context is cause for concern, Colombia has room to act preventively. In this regard, the report points to possibilities for mitigating economic risks under the current scenario.
Among Oxford Economics’ recommendations are diversifying export markets and reducing dependence on a single destination for key products — something the Colombian government has already been working on for several months.
Second, it calls for accelerating institutional improvements, strengthening public spending efficiency, and reducing fiscal weaknesses, which, according to the report, pose a greater risk than the loss of direct aid.
In parallel, it recommends keeping diplomatic channels open with the United States and avoiding political tensions translating into long-term economic measures — something that, for now, seems difficult given the ongoing confrontation between Bogota and Washington.
Finally, it highlights the need to take advantage of the moderate short-term impact to strengthen resilience, invest in productive development, and prepare the ground for more robust growth in the face of external shocks.
In fact, the Oxford Economics report paints a picture of “moderate alarm,” mainly due to a smaller-than-expected, short-term impact. Nevertheless, the real risk lies in what may come: A structural, silent but persistent impact that could weaken the foundations of growth, security, and productive diversification in the medium and long term.
In this scenario, Colombia’s economy faces genuine unease — not so much from the immediate blow, but from the wind gathering on the horizon. And although that wind will not turn into a hurricane overnight, it could become a midterm storm if Colombia does not take action with foresight and anticipation.
Colombia’s challenge is clear: To turn the moderation of the immediate impact into an opportunity to strengthen its economic and institutional structure before the risk turns into a greater cost.