January 09, 2026
Postcard from Bogotá
Europe needs Latin America more than Latin America needs Europe.
To the point!
If we overplay our hand, and we are about to do so, Latin America will turn away from us and turn China’s way.
Buenos días! I’m writing to you today from Colombia. No, don’t worry – LBBW is not getting into the business of financing drug deals. Cocaine is probably the first thing that came to mind for many of you when you read “Colombia.” Perhaps coffee, too. Don’t worry, the explanation for this missive is much more mundane. Even a chief economist takes a vacation occasionally, and I’ve given in to my longing for a country where I spent a great deal of time on (entirely legal!) business some 25 years ago.
But the fact that drugs are likely the first association, perhaps reinforced by Netflix’s admittedly excellent “Narcos” series is, frankly, a little problem. In Europe, we need to rethink our entrenched stereotypes about Latin America. Take Colombia. The country is far more than coffee and cocaine. Granted, Colombia’s GDP is smaller than that of Baden‑Württemberg, but over the past ten years it has grown by an average of 2.5% annually. Germany managed a paltry 0.8%. Colombia’s stock index COLCAP rose by about 50% in 2025. And unemployment is at its lowest it has been in a quarter century.
The danger of polarization
Colombia today is not comparable to what was routine in the days of drug terror under the Medellín cartel – forever linked to the name of “El Patron”, Pablo Escobar. I recall from my time working in the country that the only safe way to get from A to B domestically was by plane. Today, it’s not terrorism that defines the country, but tourism: last year Colombia welcomed nearly seven million foreign visitors. When I was last in Bogotá in 2000, little more than half a million fearless, adventure‑seeking pioneers dared to visit. The improvement in security underpinned the upswing in tourism as well as in the wider economy.
But the gains are not yet on solid ground. Polarization and violence are on the rise again, though nowhere near as bloody as in the bad old days. This past June, a 15‑year‑old linked to successor groups of the FARC guerrillas shot the conservative presidential candidate Miguel Uribe. For history buffs that brings back memories of the murder of presidential frontrunner Luis Carlos Galán in 1989 at the hands of Escobar’s “sicarios”, or contract killers. The first unabashedly left‑wing president since independence in 1810, Gustavo Petro – himself a guerrillero long ago, but also a broadly respected mayor of Bogotá from 2012 to 2015 – polarizes and rails against dark forces thwarting his plans. And Trump is meddling – as so often in Latin America – to ill effect. When in July the former conservative president and U.S. ally Ál-varo Uribe (no relation to Miguel) was sentenced to twelve years of house arrest for witness tampering and procedural fraud, Washington spoke of a political trial, witch-hunt – the usual litany.
At the same time, the U.S. government threatens to crack down on Colombian drug smugglers as brutally as it already has on Venezuelan ones, and labels the left‑wing president a drug trafficker, placing him on the sanctions list. Unlike Venezuela, however, Colombia is a NATO partner. The presidential election in May is likely to determine whether Colombia settles down again. As presidential reelection is constitutionally impossible, the polarizing, populist Petro will exit the stage in any case.
Fig. 1: Economic Growth Projections
in %
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Mercosur agreement as litmus test
In a world where might increasingly makes right in political practice, Latin America can be an important ally for Europe in pre-serving what remains of a rules‑based order. All the more so as the region is likely to grow significantly faster than our old Europe in the years ahead (see Fig. 1), and has plenty to offer economically. Colombia, for example, is seen as a potential supplier of green hydrogen. It also has deposits of critical raw materials – nickel, platinum, zinc, and bauxite – for which Europe is urgently seeking new suppliers to derisk its supply chains.
That’s why the EU should engage closely with such brothers in spirit. Hard to believe, but Brussels has been negotiating for more than a quarter century the world’s largest free‑trade agreement with the Mercosur member states (Argentina, Brazil, Uruguay, Paraguay, Bolivia, and Venezuela – currently suspended. Colombia is an associate member). On the free‑trade agreement with South America, the ball is on the penalty spot – and the goal is unguarded. All that is left to do is to sign on the line. It is demoralizing that last month French farmers have once again been able to thwart the deal and relegate geopolitical and economic imperatives to the back seat. For far too long, Europe pontificated from a moral high horse. But the days are over when we could foist our terms on other regions with a neo‑colonial attitude. If we overplay our hand, and we are about to do so, Latin America will turn away from us and turn China’s way. In Beijing, they would surely rejoice at such an unforced own goal of ours.
Dr. Moritz Kraemer, Chief Economist / Head of Research at LBBW
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