Colombia's economic relations with China: The role of economics and politics in trade, investment, and economic agreements

Abstract

Over the past two decades, many Latin America and Caribbean (LAC) countries have deepened their economic relationship with China by accepting large amounts of Chinese investments and signing up for China's Belt and Road Initiative (BRI). However, Colombia has not followed such a path. Using cross‐border data on trade, investment, and economic agreements, this article demonstrates that Colombia's under‐engagement with China is driven by Colombia's lower competitiveness in the commodities sectors, where Chinese demand for LAC products is highest. Colombia's limited competitiveness has led to lower exports to China and lower amounts of Chinese investment. The low level of bilateral economic activities has resulted in a lack of incentives for Colombia to sign economic agreements with China, as well as general public skepticism toward China and more favorable attitudes toward the United States even though this trend has been on the decline since 2016. Colombia can benefit from strengthening ties with China, without distancing itself from the United States, on issues pertaining to energy transition and the development of rural infrastructure, which will help reduce inequality and broaden export diversification in the medium to long term.