Petro's Colombia has not significantly scared away FDI, but neither has it properly boosted it.

Colombia is an upper middle-income country, according to the World Bank classification. With a population of 52.89 million people and a vast quantity of natural resources, it should be a growing economy with an attractive market for foreign investment. However, the reality of the current situation does not reflect this expectation. The growth estimated by the IMF for Colombia stands at 2.5% for 2025, an increase from 1.6% last year (for 2026, slower growth of 2.3% is projected); slightly below the average in comparison to its regional peers but still within normal parameters for the region.

Many attribute this economic underperformance to the current administration of President Gustavo Petro and his policies that some claim have driven away much needed investment, both domestic and foreign, necessary to stimulate the economy in the post-pandemic world. Yet the situation is more complex as foreign direct investment (FDI) has clearly recovered since the pandemic, and international financial institutions have somewhat retained trust in Colombia's financial and political institutions despite the apparent instability of the government. Still, it is true that growth and investment have not risen as many would have expected, and the administration's actions seem conducive to worsening the current situation. This is reflected in the 15.2% drop in FDI in 2024, which domestic financial institutions such as Corficolombiana have attributed to high interest rates, an increasing tax burden, and a decline in corporate trust. Institutions such as the Colombian Congress and the independence of the central bank appear to have guaranteed investor confidence despite the political turbulence of the last three years.

Evolution, origin, and distribution

In the context of this analysis, FDI has measurably risen since the historic pandemic low in 2020 when it reached only 843.99 million USD; lower than in the aftermath of the 2008 economic crisis, according to the Banco de la República. In the post-COVID context, it reached historic highs of 5,042.6 million USD in 2022 and 5,334.76 million USD in 2023; the latter during Petro's presidency. Whilst DFI has recovered after the pandemic, since 2023 it has continued to fluctuate within the parameters for the pre-pandemic 2010s. Additionally, since 2023, total annual FDI has been decreasing as a percentage of GDP, going from 5% of GDP in 2022 to 3.4% of GDP in 2024. In 2025, the trend of decreasing FDI continued, dropping by 14% in relation to 2024, from 9,620 million USD in 2024 to a total of 9,174 million USD in FDI for the year 2025, according to preliminary data. Nevertheless, it does not appear to reach the same quarterly highs within the year as it did before the pandemic, remaining below the average peaks of both the Juan Manuel Santos and Ivan Duque presidencies (except for the pandemic). This could indicate that while the economic attractiveness of the Colombian economy for foreign investment has recovered, there are still factors that keep it from fully recovering or even growing as it should.

To better understand the nature of FDI, and thus possible reasons for these trends, it is important to look at the origin and distribution of said investment across the different sectors of the national economy and how they have shifted in the years of the current administration. Generally, the top 5 largest and most consistent foreign investments in Colombia have come from the US, Spain, Panama, Anguilla, and the United Kingdom. This is reflected in both the 2024 and 2025 FDI reports, in which in 2025 the US invested $1.184 billion, Spain $448 million, Panama $426 million, and Switzerland $270 million (surpassing Anguilla's $245 million for this year so far). Two elements to highlight are the presence of three tax haven countries and the vast difference between the top investor (the US) and the second (Spain). This investment is distributed across various economic sectors, yet in the last four years the areas with consistently higher rates of investment are: financial and business services, petroleum extraction, manufacturing industry, mines and quarries, and commercial services (commerce, restaurants, and hotels).

Understanding this distribution of FDI, both in its origin and destination, is vital to examine how it has been and could be further impacted by the current government's policies. For example, in 2024, while overall FDI fell by 15% compared to 2023, this drop was concentrated in certain sectors such as finance, raw resource extraction, and manufacturing, while commercial services and corporate reinvestment of profits grew, as highlighted in an ECLAC report (p.66). Therefore, it is key to understand that in economic reality, elements such as investment, growth, or inflation do not react immediately to changes in the factors that influence them; the effects of COVID-19 are still being felt in the national economy. Therefore, the effects of Petro's policies in this area, while observable to a degree, cannot yet be decisively observed in a wider chronological context.

Señales preocupantes desde la Colombia de Petro

One worrying sign for FDI in Colombia was Standard & Poor's lowering of itscreditworthiness ratingfrom BB+ to BB back in June 2025. This standard essentially measures the Colombian state's reliability as an issuer of debt in its ability to pay back the interest and debt of all those who agree to invest in the country's sovereign debt. Grading standards like this function as confidence meters for investors who look to invest not only in Colombian public debt but also in the country as a whole, by acting as a barometer for the financial responsibility and health of the state. Part of the issue that led to this lowering of the grade is the abandonment of the fiscal rule that establishes the legal limits for government deficits and public debt, which was established by Law 1473 of 2011 and had already been reformed in 2021 to broaden the limits during the pandemic.

This comes in the context of historically high public debt and deficit which, although it began and spiked during the pandemic, has continued to rise in recent years. From 2024 to 2025, government spending increased by 3.9%, from COP 503,244 billion to COP 523,007 billion. This could raise the national deficit from 6.25% of GDP in 2024 to 6.9% for 2025, as estimated by the IMF. The deficit reached levels below even the late 90s and only comparable to the pandemic years. This exceptional deficit is due in large part to the administration's expansion of government subsidies, bureaucratic apparatus, and state agencies, all part of Gustavo Petro's political platform and strategy. This only appears to have been made worse by the government's decision to raise the monthly minimum wage by 23% for 2026 onwards, which could increase government spending by 18.5% in the coming year.

The economic issue of the administration’s spending-prone policies is not only relegated to the negative effects of a rising public debt and the concerning issue of investor confidence, but also the government’s attempts to ‘remedy’ the fiscal situation appear to be more damaging than beneficial. In line with his ideological doctrine, Petro and his administration are very much partial to lowering the deficit by raising taxes in order to fund his political projects. This is reflected in the latest tax reform proposed by Finance Minister Germán Ávila to Congress in September, which seeks to raise USD 6.3 billion in 2026 to help finance the rest of the government budget, which totals USD 139 billion. The proposed reform would raise the income tax on fossil fuel extraction companies by 15% (raising the total tax to 60%) and the taxes on dividends by 10% (raising the total to 30%); this would mean that in some cases a foreign investor would have to pay 54.5% tax on net business profits. For its part, his 2026 budget already represents an increase in government spending of 8.8% in relation to the previous budget, a decrease in debt repayment of 11%, and only a 5.3% increase in government investment (which could actually help boost economic activity).

Overall, this paints a concerning fiscal picture of the current administration, one which has an oscillating but growing deficit and debt (national debt as a percentage of GDP increasing from the pre-pandemic 51% to 61.9% in 2025), and seeks to remedy it with an increase to an already overbearing tax load on the sectors of the economy that would affect FDI the most; such as oil and mineral extraction and the financial sector. If implemented, most of this would go to funding even more government bureaucracy and social programs and not to actually resolving the fiscal situation. Furthermore, this "solution" of tax increases is not as straightforward as it would seem, since through economic concepts such as the Laffer Curve it can be seen that more taxes do not equate to more revenue and can actually result in an overall reduction in tax revenue by promoting evasion, divestment, and economic stagnation.

Another element that is important to analyze is the ongoing staff diplomatic feud between Gustavo Petro and Donald Trump, and the effect of this on the erratic imposition and retraction of tariffs. In November, the Trump administration removed the tariffs it had imposed a month earlier on grain imports from Colombia and reduced those on beef, tomatoes, and plantains. This tariff would have had serious consequences for both the US and Colombian markets, as Colombia is the second largest exporter of coffee to the US, and the US is the largest buyer of Colombian coffee. This episode is only the latest thaw in a series of staff between the two heads of state that result in the imposition and later withdrawal of tariffs or other forms of economic or diplomatic pressure. Just in October, Trump had threatened to impose more tariffs in response to an argument with his Colombian counterpart over X.

This unpredictable and emotion-based back and forth has serious economic consequences, not only the direct imposition of tariffs, but also the shaking of confidence of US investors in Colombian industries such as coffee that their investments will be and remain profitable. This is particularly worrying in the context of FDI in Colombia, since, as mentioned previously, the largest foreign investment comes from the US, and damaging this close economic relationship could have a serious impact on FDI in the Colombian economy. This fear has grown since the latest and most acute Trump-Petro clash following Venezuelan President Nicolas Maduro's capture by US forces in January 2026.

Perspective of confidence

Despite all these concerning developments, it is important to once again point out that the Colombian economy has recovered and seen growth since the pandemic, and that FDI has also recovered to a significant degree. All of this is largely due to the stability of and trust in Colombian political and financial institutions. It has been the independence of the Colombian legislature that has prevented the new tax reform bill from being passed into law, and it has been the independence of the central bank that has kept monetary policy stable and consistent with economic reality. While the full effects of Petro's presidency on FDI cannot be seen at the moment, they can be predicted by looking at those effects already observable throughout his term in office, which, at least in terms of percentage of GDP, might indicate a shift in confidence among foreign investors, resulting in slower growth than expected.