The recent assassination of Senator Miguel Uribe Turbay, Colombian presidential candidate and reform advocate, has jolted Colombia’s politics and rattled its markets. Shot at a campaign rally in Bogotá in June, and passing away from his injuries after two months in hospital, Uribe’s death marks the most serious act of political violence the country has seen in decades.
Several financial outlets, including Bloomberg, Reuters, and domestic sources such as Portafolio and La República, have identified the assassination as a political risk event, with the potential to drive capital outflows and risk repricing. Analysts from major banks are also expected to publish revised outlooks in the coming days.
Uribe’s assassination is now not only a national tragedy, but a warning sign for investors. With elections approaching, Colombia’s institutions face a test of credibility. Signs of doubt are beginning to show.
On 21 August, the peso slipped by 1.8 per cent against the U.S. dollar to trade near COP 4,350, whilst yields on 10-year government bonds rose by 25 basis points, according to Refinitiv data. The moves were modest but pointed to real investor unease. Financial markets do not react to emotion; they respond to risk. Risk that is being repriced, as reflected in rising credit default swaps (CDS). If political violence escalates and institutions cannot contain it, Colombia’s financial outlook will deteriorate.
CDS — insurance contracts against sovereign default — serve as an early signal of investor concern. Figures compiled by Bloomberg show that five-year CDS spreads widened by around 15 basis points in the first two trading sessions after Uribe’s death was confirmed. The increase was not dramatic, but it signalled that investors had begun hedging against political instability.
If Colombia fails to contain the fallout from this assassination, it is sure to do great economic damage. By triggering capital flight, it would have real effects on domestic financing costs. Investors may seek safer markets like U.S. Treasuries. Asset managers with exposure to Latin America may reallocate Colombian holdings to economies with stronger perceived stability, like Chile or Peru. And it would not end at just making domestic financing more expensive – Colombia is already more sensitive to political shocks than other nations due to its inclusion in the JP Morgan Emerging Markets Bond Index (EMBI). In similar situations, sovereign spreads in the EMBI have widened by 30 to 70 basis points within a matter of days. Movements in the peso, typically three to five per cent in such periods, have had real effects on inflation, debt servicing, and purchasing power, hurting civilians financially who already struggle with entrenched violence and poverty.
A pattern with precedent
Colombia is no stranger to destabilising politics affecting the economy. In August 1989 another presidential frontrunner, Luis Carlos Galán, was assassinated at a campaign event near Bogotá by a drug cartel. Within days, the peso had dropped by almost four per cent against the U.S. dollar. Bond yields climbed by 60 basis points. Foreign capital exited. The crisis did not end quickly. In the years that followed, Colombia’s sovereign debt consistently traded at a higher premium than its regional peers. Investors priced in long-term instability and borrowing costs stayed elevated. Galán’s assassination left a lasting financial scar. Uribe’s death could do the same unless Colombia demonstrates institutional control.
Institutional strength over sentiment
Colombia in 2025 is stronger than it was in 1989. The central bank, Banco de la República, remains independent and has a clear mandate when it comes to controlling inflation. It also plays a central role in maintaining currency stability, particularly during periods of capital outflow and exchange rate volatility. Inflation has declined from double digits in 2022 to about six per cent today — still above target, but moving in the right direction. The central bank continues to target an inflation range of two to four per cent, underscoring that price stability remains outside the desired corridor despite recent progress. The banking sector is more capitalised, and financial regulation has improved.
That is not to say that Colombia can afford complacency. It is currently running a fiscal deficit of nearly five per cent of gross domestic product (GDP). In a populist streak, the government has suspended the fiscal rule earlier this year that had anchored budget discipline since 2011. Without a credible plan to restore that rule, Colombia’s fiscal credibility will remain under pressure.
And Uribe’s death has already shifted the presidential campaign’s focus. Security, previously one issue among many, now dominates political debate. Candidates have adjusted their messaging to reflect public concern, and promising action. But while strong language may appeal to voters, it also introduces new risks for investors – namely that economic policy may become a secondary concern.
Populist language may win votes in the short term, yet it often comes at the cost of institutional discipline. Inconsistent signals from politicians raise borrowing costs and delay investment.
If candidates offer unreliable economic plans or shift away from technocratic policymaking, the perception of Colombia as a reliable borrower will continue to weaken. The suspension of its fiscal rule has already raised questions about long-term policy discipline. Colombia’s sovereign debt is rated just above speculative grade. A further downgrade would raise borrowing costs significantly and could trigger forced selling by institutional investors with minimum credit thresholds.
Political violence only deepens these concerns. If the upcoming election encourages polarised rhetoric or weakens investor confidence in institutional leadership, Colombia may face a sustained increase in its cost of capital. The question for investors is not whether this event is serious — it is whether the country’s institutions can contain its impact.
Colombia faces a clear test
Senator Uribe’s assassination is, above all, a loss for his family and supporters. But it is also a key moment for Colombia’s democracy and financial stability. Political violence introduces uncertainty. Uncertainty raises risk. And risk increases the cost of capital.
History shows that markets do not treat such events as isolated. Galán’s assassination in 1989 left a lasting mark on the country’s financial trajectory; the current crisis could do the same.
The next few months will determine the outcome. If the judiciary acts quickly, the security forces protect electoral integrity, and policymakers recommit to fiscal responsibility, investor confidence may hold. If not, the pressure will rise sharply.
For Colombians, the cost of political instability is measured in lives. For investors, it is measured in spreads, yields, and exchange rates. Analysts at JP Morgan estimate that Colombian EMBI spreads could remain 30 to 50 basis points wider than regional peers in the weeks ahead unless political tensions ease and fiscal discipline is restored. The responsibility now lies with Colombia’s leaders to ensure that this tragedy does not lead to wider financial damage.
