COLOMBIA – JULY 2026 COUNTRY UPDATE

Back From The Dead: Colombia Ended Its Experiment With The Far-Left By Electing Right-Wing Abelardo De La Espriella As President. Expect An Economic Rebound, Lower Interest Rates, A Better Investment Climate And A Resumption Of Housing Subsidies. Given The Good News, The COP/USD Appreciated 15% YTD, The Stock Market Appreciated 12% And The 10-Year Bond Yields Decreased 100bps. 

Executive Summary

After 5 years of refraining from promoting Colombia as an investment destination, recent trends have changed:

• New Pro-Business President: New President Abelardo de la Espriella begins his four-year term on August 7^th. De la Espriella’s political platform blends aggressive law-and-order policies, a pro-business economic strategy and closer ties to the US. We expect the new administration to reignite middle class growth, unleash pent up demand for housing and generate new demand for commercial real estate.

• A Free Venezuela? On January 3, the US captured Venezuelan President Nicolas Maduro in a military operation and replaced him with a cooperative administration. Venezuela has the world’s largest proven oil reserves and in theory should be a wealthy country. A western-oriented regime in Venezuela would be a big plus for both Colombia and the region. 

• Demographic Dividend: The Colombian fertility rate has declined from 3.0 births per woman in 2000 to 1.6 in 2024. In the near term (20-40 years), a declining birthrate can lead to an increase in national wealth as experienced in other emerging countries.

• Regional Shift to the Right: After swinging to the left in 2020-2023, the LatAm political pendulum has now gone the other way. Peru, Colombia, Chile, Argentina and El Salvador have all recently elected populist right-wing governments.

What does this all mean for foreign investors? If currency and bond risk premiums were to continue at today’s levels, current investment returns may not be sufficient for many foreign investors. But what if the new wave of governments is successful and finally unleashes more of LatAm’s potential? What if the region embarks on a path of sustainable economic growth and risk premiums subside?

When El Dorado Capital Advisors first entered Colombia in 2008, the country was at the cusp of a new era.  After being held back for decades by bad governments and security concerns, the country was finally open for business. For the next decade, the economy was the fastest growing in the Americas. The currency was stable, and the credit rating upgraded. Commercial real estate was being professionalized, and residential development was a sure thing.

In 2008, there was an arbitrage opportunity between what local investors and landowners could see and what international investors could foresee. Early investors were rewarded with very high returns. We may be glimpsing at the onset of such a period again.

The question now is whether the country can establish itself firmly on the path to a higher-rated, more resilient upper middle-income economy. Accordingly, El Dorado Capital Advisors is monitoring the policy positions of the next government.

Economy

Latin America

LatAm's growth is expected to moderate from 2.4% in 2025 to 2.2% in 2026. This will leave LatAm as a laggard among emerging markets (EM), behind both the overall global growth rate of 3.2% and the overall EM growth rate of 4.1%.

LatAm countries are not a homogeneous bunch – each has their economic drivers and challenges, and overall, the interdependence of the economies is less significant than, say, in the EU. In 2026, Colombia GDP growth (2.6%) compares favorably to its regional peers - Peru (3.3%), Chile (2.5%), Brazil (2.2%) and Mexico (0.5%).

While not what it once was, LatAm also still has a demographic advantage. In China, the working age population is already in decline, and the drop-off is accelerating; the government estimates the workforce will shrink by 100 million by 2035. While LatAm fertility rates have fallen to near developed country levels, the population is expected to grow until 2053, when it will peak at 730M, about 10% higher than today. Furthermore, by concentrating resources on fewer children and freeing women to remain in the workforce, per capita income is expected to increase (as happened in developed countries).

From 2020-2023, there was much discussion about the new wave of leftist governments in LatAm. Now the political pendulum has swung the other way. Peru, Colombia, Chile, Argentina and El Salvador have recently elected populist right-wing governments. However, the Left are likely to stay in power in Brazil after the October election.

There is a catch to this promising landscape: the historical ambivalence of LatAm governments toward the private sector and the market-based reforms necessary to modernize their economies. In 2012, East Asia had roughly the same per capita incomes to LatAm, as measured by purchasing power parity. Today, East Asia is 40% ahead. 

The fundamental paradox of LatAm has long been that it possesses extraordinary natural endowments yet systematically underperforms relative to its resources. The region is home to over 40% percent of the world's copper reserves, more than half of known lithium reserves and vast stores of agricultural and energy resources.  Countries such as Brazil, Argentina, Chile and Peru serve as global powerhouses in soybeans, beef, coffee, copper, silver and rare earth elements. Yet despite this abundance of extraordinary natural resources, its share of global GDP and manufacturing value added remains modest at approximately 7.1% percent and 7.5%.

This underperformance has deep structural roots. Political instability and frequent policy reversals have undermined long-term investment, while fiscal deficits have left countries vulnerable to external shocks. Inequality has fueled social unrest and limited the development of a robust middle class.

The 2026 election cycle is taking place against the convergence of three global and regional structural forces:

• Critical minerals demand: The global transition to digital and green economies has placed an unprecedented premium on critical minerals

• Interest rate easing: This lowering of interest rates arrives just as LatAm need cheaper capital to finance infrastructure, industry and housing.

• Political pendulum swing: The electoral pendulum is swinging towards a more centrist/right-leaning leadership committed to pragmatic market-friendly policies.

Overlaying these structural forces is a geopolitical catalyst that has fundamentally reordered the region's strategic landscape: The capture of Venezuela’s Maduro has removed a bad actor and facilitated LatAm integration into U.S.-aligned trade, security and technology architectures. The Trump administration considers that the great powers – China, Russia and America – should have their respective spheres of influence, and America’s should extend from Canada’s northernmost territory to Argentina’s Tierra del Fuego.

Venezuela has the world’s largest proven oil reserves (304B barrels – 18% of global reserves) and in theory should be a wealthy country. A western-oriented regime in Venezuela would be a big plus for both Colombia and the region but may take 5-10 years to flourish.

LatAm stock markets (MSCI LatAm) are up 12% YTD in 2026 (vs S&P 11% and TSX 12%) as investors anticipate political shifts and favorable economic conditions. 

Colombia

Colombia's GDP grew by 2.2% in Q1 2026. Consensus 2026 GDP is 2.6% in 2026 and 2.8% in 2027. Expect 2027 growth to be upwardly revised when the new president’s policies are in place.

Inflation increased to 5.8% in May.  Looking ahead, expect the 23% minimum wage increase to continue to exert significant upward pressure on inflation in 2026 and 2027. Consensus inflation for 2026 is 5.9% and 2027 is 5.2%. Colombia inflation averaged 3% 2010-2019

The Central Bank of Colombia recently increased the policy rate to 12%. Recent increases have arisen as policymakers react to rising inflation pressures. The consensus expectation is for the interest rate to decrease to 10.0% by the end of 2027 and 8% in 2028. The benchmark interest rate is the basis of most mortgages.

The four-year term of Colombia’s first-ever leftist president Gustavo Petro is finally coming to an end in August.  Most of Petro’s reforms failed to be implemented, he weakened the economy and his “Total Peace” process failed spectacularly as nearly 20 years of security gains in rural Colombia were undone during his 4-year term.

On June 21st, Abelardo de la Espriella won the presidential election by a narrow margin of only 250,000 votes. This is the narrowest in Colombian history and is indicative of a very polarized society.

De la Espriella’s political platform is anchored in a right-wing, populist agenda that blends aggressive law-and-order policies, a market-friendly policies and social conservatism. However, it will take an immense effort to turn around the high government deficits that Petro left behind.

However, De la Espriella is not without issues. He made his name defending paramilitaries and corrupt politicians. His persona is that of a flashy, media-savvy millionaire known as "El Tigre." He has no track record of public office. Nothing in his platform signals a plan — or much compassion — for Colombia’s poor.

A good sign – his VP pick, José Manuel Restrepo, is a highly regarded former Finance Minister. His minister appointees to date are also highly regarded.

We do hope that De la Espriella leads a government for the benefit of all Colombians so that even the lower classes can participate in Colombia’s new wealth creation. 

De la Espriella proposed a new housing subsidy policy País de Propietarios (Country Of Owners) with the aim of increasing sales to 250,000 annually from the current level of 150,000 annually. The foundation of the policy is a 2% real mortgage interest rate, amortization periods as long as thirty years and the elimination of the deposit requirement.

Among LatAm nations, Colombia has a particularly compelling opportunity in nearshoring/ friendshoring of supply-chains.  To date, and notwithstanding Petro dampening impact, this has manifested itself in strong services growth, primarily in IT and business process outsourcing (BPOs) which has lent strength to the office market. Expect this to accelerate now that Colombia has a more US-aligned government.

Regarding demographic trends, the Colombian fertility rate has declined from 3.0 births per woman in 2000 to 1.6 in 2024., slightly below the LatAm average of 1.8%.  This decline is attributed to increased access to education, progress in gender equality, and greater female participation in the workforce.

In the near term (10-20 years), a declining birthrate could lead to an increase in national wealth:

• Demographic Dividend: A period where there are fewer children and a larger working-age population, which can fuel economic growth.

• Increased Human Capital: Smaller families can lead to more resources and investment per child, improving education and health, resulting in a more skilled and productive workforce.

• Greater Female Labor Force Participation: .Falling birthrates can free up women to enter or remain in the workforce, increasing the overall number of workers and contributing to economic activity.

• Resource Reallocation: Resources previously spent on larger families (e.g., housing, childcare) can be redirected toward more productive investments like R&D and advanced technologies.

• Higher Living Standards: An increase in per capita income and per household income should increase the middle class and benefit housing.

Residential

YTD June 2026 Colombian pre-sales decreased -8% vs 2025. This suggests a 2026 run rate of 150,000 pre-sales, below the historical average of 180,000 units.

VIS (subsidized housing representing 70% of the market) pre-sales were largely driven by subsidy programs which were suspended in 2024. Further hindering pre-sales is the spike in mortgage rates, up 200 bps YTD (now 14% vs historical average of 10%).

New President Abelardo de la Espriella has proposed a new housing subsidy policy País de Propietarios (Country Of Owners) with the aim of increasing sales to 250,000 annually from the current level of 150,000 annually.

The foundation of the policy is a 2% real mortgage interest rate, amortization periods as long as thirty years and the elimination of the deposit requirement. The mortgage subsidy brings it close to the former Mi Casa Ya program, but the elimination of the deposit requirement could be a game changer to the positive.

Practically speaking, the housing policy won’t be finalized until late 2026 and some eligible VIS purchasers may delay purchasing until the new program is established. Consequently, pre-sales will remain slow in 2026. The final policy may be less generous that what was proposed.

With the new housing policy, annual pre-sales could surge from 150,000 in 2025/2026 to 230,000 units in 2027/2028. Cancels, still high at 34%, could dramatically decrease. 

Developers did not increase VIS pricing for 2026 deliveries by the 23% increase in minimum wage, opting for a more manageable 7% increase. However, new launches may reflect the full 23% price increase and consequently be very profitable to developers.

Like other developed countries, housing affordability has hit a wall. The new housing policy offers some relief, at least in the short-term.

The past few years have challenged the traditional Colombian residential development model. Notwithstanding the new housing policy, cancels still need to fall below 10% for the development model to fully function again.

Colombia currently has a 4.9M unit housing deficit. With annual household formation averaging 340,000, between 200,000 and 250,000 households will have the means to buy a unit under the new housing policy. While 45% of Colombian’s rent, nearly all new supply is geared towards condo development.

Potential Opportunities:

1. Invest in viable projects from medium-sized builders that are being held back due to a lack of financing.

2. Provide liquidation mechanisms for unsold inventory at the completion of projects.

3. Recapitalize developers or provide alternative development financing options as the current amount of capital is insufficient to meet demand.

4. Establish a residential rental platform.  

Office

Office vacancies are stable (Bogota 7%, Medellin 6%), net absorption positive, and market rental rates are rising (up 3% in Bogota and 1% in Medellin YTD). The office market has been helped by the growing presence of BPO tenants. Compared to North America, physical office occupancy is very high with nearly all employees working 3+ days in the office. The vacancy rate compares favorably to regional peers (Mexico City 17%, São Paulo 16%, Rio De Janeiro 25%) and international markets (New York 13%, Toronto 16%).

Most rents are CPI linked (usually CPI+1%).  Since 2019, CPI has increased 50% while market rents have increased 40%. Therefore, it is not uncommon for in-place rents to be10%-20% higher than market rates. As Colombian leases do not offer the same ironclad protections to landlords as North American leases, powerful tenants are negotiating to bring their leases back to market. So, while in theory, average in-place rental rates should increase ~6% in 2026 and ~5% in 2027, actual increases should be about half of this (negative in real terms). It is unlikely that today’s Argus-based valuations are picking up this phenomenon (i.e. properties may be over-valued). This trend is impacting all asset classes.

Most leases are semi-gross with landlords responsible for insurance and real estate taxes. These expenses (approximately 15% of revenues) have increased at a rate of around 10% in recent years, far exceeding inflation and consequently cutting into property NOI. This is presently not being picked up in Argus-based valuations. Tenants generally pay for their own improvements.

Typically, in Colombia, financing for property portfolios has been through unsecured corporate debt instead of individual mortgages on properties. Banks are increasingly requiring partial mortgage security and amortization. With interest rates around 11%, the we believe that financing constraints will lessen the pool of purchasers and put a damper on valuations.

Valuation remain sticky. Valuation cap rates remain ~8.5% and discount rates ~12.5%, even though the 10-year government bond rate is now 11.8%.

Internationally, while discount rates don’t necessarily tightly track 10 year bonds, they usually trade at a 200bps – 300 bps spread. El Dorado Capital Advisors thinks discount rates of 12.5%/8.5% are understated and 13.5%/9.5% are more realistic. However, with few traders, valuation parameters are disconnected because only a few owners trade amongst themselves. This represents a 10% over-valuation. Also implicit in North American low cap rates are benefits from leverage which don’t exist in Colombia. This observation applies to retail and industrial as well.

Retail

Retail vacancies are stable (Bogota - 3%, Medellin 1%) with rental rates increasing 7.5% in Medellin but decreasing 7.5% in Bogota. The retail market has been helped by strong retail sales growth. However, some major tenants used their leverage to reduce contractual rental rates.

Contrary to North America where shopping centers serve an essentially utilitarian function, modern Colombian retail malls have in fact become part of the social fabric that serves a community function much like the old town squares used to decades ago. Expect resiliency from this asset class.

Retail cap rates remain unchanged at 8.0-8.5%.

Most retail tenants have long-term semi-gross leases with contractual annual rent escalations (>CPI). Tenants generally pay for their own improvements. 

Industrial

The industrial market is very strong with low vacancies (Bogota - 4%, Medellin - 3%), positive net absorption, and market rental rates that are rising (up 4% in Bogota and 0% in Medellin YTD). Colombia’s industrial market did not experience the spike in rental rates typical of many developed markets. Since 2018, average rental rates increased 40%, while North American rates increased 100%-200%.

Colombia has a small industrial base and its logistics market has been limited by road and transportation infrastructure. Furthermore, the rapid growth of e-commerce, characteristic of most developed markets, has not yet occurred in Colombia.

Most industrial tenants have long-term semi-gross leases with contractual annual rent escalations (>CPI). Tenants generally pay for their own improvements.

Historically, Colombia has had only a limited number of large-scale credit tenants which has increased the risk of owning large single-user buildings.

Colombia’s industrial market is relatively small at ~ 10M M2 versus Canada’s 190M M2 and USA’s 1,500M M2.

Industrial cap rates stable at 7.0%-8.0%.  

Real Estate Capital Markets

Interest rates on corporate and development debt increased to about 14.0% pre-election but are now on a downward trend. This is still high compared to 8-9% pre-COVID. Higher interest rates have diminished development profits and rendered many projects unviable.

In the US, the average office REIT trades at a discount to NAV of 16% (33% for US office REITS). Similarly in Colombia, publicly traded real estate funds are trading at steep discounts to NAV.  Consequently, real estate funds, which have been major sources of real estate capital, have been shut out of the market.

While the demand for commercial and residential real estate remains strong, a scarcity of capital will suppress new supply for the next few years. El Dorado Capital Advisors foresees pent up demand fueling a strong real estate recovery in 2027-2028 once interest rates recede and investor confidence returns.

Conclusion

The Colombian real estate market continues to demonstrate resiliency, and we expect that to continue going forward. The market has been disciplined and has avoided overbuilding. We do not see Colombia real estate succumbing as much to some of the macro trends impacting real estate in the developed world such as WFH, AI and e-commerce. However, high interest rates and a scarcity of capital will continue to suppress supply.

In spite of the 15% appreciation of the currency and 100 bps drop in 10-year bond yields, current investment returns may not be sufficient for many foreign investors. In 2008, there was an arbitrage opportunity between what local investors and landowners could see and what international investors could foresee. Early investors were rewarded with very high returns. We may be glimpsing at the onset of such a period again.

El Dorado Capital Advisors expects that risk premiums for investing in Colombia will subside with the new government. We continue to monitor price dislocations or capital deficiencies that will trigger the next wave of attractive investment opportunities.