Decertification is deserved – yet unlikely to do much damage
U.S. President Donald Trump has identified Colombia as a major drug transit or primary illicit drug-producing country, along with the usual suspects, among them Afghanistan, Bolivia, China and Mexico. It’s not surprising that President Gustavo Petro’s policies and military strategy have led Colombia back to the time the country was first decertified, in 1996-1997. It takes effort to undermine a strategic relationship between Colombia and the United States, built over many decades of cooperation. Series like Netflix’s “Narcos” show the depth of such a relationship, and its humongous costs in lives and money. We present an analysis by Universidad de los Andes professor Daniel Mejía outlining why, when and how Colombia’s fight against drugs weakened, along with a Colombian-American Chamber of Commerce forecast on the likely impact of decertification on key economic areas.
This information, and the causalities of government policies in the strengthening of this multinational crime, support the U.S. government’s indignation against Colombia. We discuss the likely effects on tourism, bilateral cooperation and constrained access to multilateral sources, but suggest that concerns are exaggerated. It’s likely that neither tourists nor multilaterals care, and that the U.S. administration will keep sending money to the Colombian police and Army, to keep them fighting against the bad guys. The international financial markets don’t care either, as seen by the continued strengthening of the peso. Decertification used to be U.S. foreign policy tiger, but nowadays seems more like a house cat. Less amusingly, narco trafficking has grown into a monster crippling entire Caribbean countries. That is why the U.S. Navy is in front of Venezuelan shores, signaling that the Trump administration is moving from words on paper to boots on the ground -- or at least to ships on the sea.
The potential fiscal impact of the constitutional amendment to shift more resources from the central government to states cannot be overstated. As it implies taking SGP/ICN from its current level of around 27.5% to 39.5% by 2038, the amendment could have at least two dire consequences. First, future central government tax reforms will have to be larger to generate the required net revenue, as more funds will be automatically transferred to the regions. Second, SGP will soar as a percentage of GDP after 12 years: from 4% in 2024 to above 7% by 2038. Fortunately, this is just a draft – but we’re just three months away from the December 27th submission deadline.
Debt management operations led by Public Credit Director Javier Cuéllar have commanded market attention. Cuéllar’s strategy to shorten debt duration makes sense amid volatility, but masks the deeper problem of swelling deficits. Roll-over risks in local short-term debt are rising, and markets cannot ignore them forever.
The latest labor market figures from DANE show encouraging but puzzling results. Urban unemployment fell to 8.4% in July 2025—its lowest level since 2012 and well below the estimated natural rate of 10%–11%. Yet employment creation has been modest. The fall in unemployment thus owes more to low labor force participation than to robust job growth. More troubling are inconsistencies in job composition. Formal private employment surged unexpectedly despite weak economic activity, while public employment has plunged —contradicting evidence of new hiring, especially in health and government programs. Nor do sectoral patterns align with production data. While DANE remains one of Colombia’s most trusted institutions, these inconsistencies must be clarified in order to preserve confidence in its data.
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