By Giselle Alzate | 2025-01-09

BOGOTÁ -- Colombia's possible inclusion in China's Belt and Road Initiative (BRI) -- also known as the New Silk Road -- presents a potential double-edged sword for the South American nation.

Promoted as a platform for infrastructure development and trade cooperation, the Chinese initiative has captured the interest of the Colombian government, which is actively negotiating to join.

In October, Colombian Vice Foreign Minister Jorge Rojas announced that the country is negotiating formal entry into the BRI with the goal of leveraging Beijing's financing of mega-projects.

"Colombia will join [the BRI] following negotiations that consider the priorities and needs of both nations," Rojas stated on social media earlier that month.

Local media reports indicate that Colombia's formal entry into the initiative could be announced as early as February, coinciding with the 45th anniversary of diplomatic relations between Bogotá and Beijing.

Debt trap

Observers have raised concerns about the latent risk of Colombia falling into a "debt trap" with China, a scenario that has affected countries like Venezuela during 25 years of Chavismo and Ecuador under former President Rafael Correa (2007–2017).

As of last July, Venezuela owed China about $10 billion.

Meanwhile, even after a 2022 debt restructuring, Ecuador still owes China almost $3 billion.

Numerous negotiations will unfold before the Chinese initiative takes effect early this year, Daniela Rueda, an analyst at Colombia Risk Analysis, told Entorno.

However, inept negotiation by the Colombian government could lead to "disastrous" consequences, potentially plunging the country into an unsustainable debt crisis, she said.

"Like any form of integration, it brings opportunities but also entails certain risks. For Colombia, indebtedness is a particularly significant concern that must be carefully weighed," the analyst remarked.

"We've seen how countries in Latin America and Africa have been impacted by debt issues tied to China."

Chinese state banks often impose specific conditions on their infrastructure loans, said Rueda. "If Colombia is not vigilant, it risks agreeing to terms that may be less favorable."

"This could not only impact Colombia's debt levels but also limit its ability to secure financing in the future," she added.

Vigilance

China has proposed bilateral financing measures under the BRI framework, Sergio Guzmán, director of Colombia Risk Analysis, pointed out. However, "the details of these measures remain unclear -- we don't know the terms, deadlines or conditions," he said.

"We need to remain vigilant, assess the direction of these agreements and carefully evaluate the potential risks," he emphasized. "Constant and consistent monitoring of their implications is essential."

Colombia's decision to join the Chinese initiative could lead to financial dependence on Beijing, said Rueda.

"By deepening and expanding these relations with China, without careful planning for how we integrate into the [BRI], we risk significant challenges related to debt and potential reliance on China," she warned.

Latin America's two largest economies, Brazil and Mexico, have yet to join the BRI, reflecting caution or skepticism toward the initiative.

China already has free trade agreements with Chile, Costa Rica, Ecuador, Nicaragua and Peru and has invested billions of dollars in Latin American infrastructure projects.

However, much of this investment comes in the form of loans that often carry unfavorable repayment terms.