Colombia Returns to the Right-Side of the Force

Dear all,

We welcome you to the Greater Caribbean Monitor (GCaM).

The latest weeks have provoked mixed feelings for the U.S.-led order in Hispanic America. On the one hand, Colombia has some good news on the horizon for Donald Trump. Petro is headed out of Casa de Nariño. And his heir, Cepeda, will likely not be the successor to his authority. While tomorrow's elections will likely show the left as winners, the right is on the correct path to returning to Colombia's power, and de la Espriella is one of those good allies for the U.S. Just follow the rule: if the left calls someone a “populist right-extremist” or “far-right populist,” that means he is a conservative facing a socialist they want to depict as moderate.

On the southernmost part of South America, things are—pun intended—turning south. Rodigo Paz's rule in Bolivia is shaking, thanks to a very well-known U.S. enemy: Evo Morales. In his attempt to evade justice, the socialist has set the country on fire, and the U.S. ally in power, just 6 months after he took office, is backed up against the wall. Things are not looking good for the Hispanic-Bolivian. But even more concerning is the position of the most expressive Trump ally in the region (along with Javier Milei), and that's Kast, in Chile.

The legacy of Boric was terrible for Chile and their longstanding relationship with the U.S., but there is one thing where even the biggest Trump supporter has doubts: risking the economic benefits of their friendship with China to please their hemispheric ally. And the time has come for Kast to face that challenge, just like others in South America (including Milei) have. This time, a diplomatic ticking bomb hides in La Moneda, and it's all because of the internet. We will follow this matter closely in the weeks to come.

In this issue, you will find:

• What the Markets Predict in Colombia

• The Chilean Submarine Cable Crisis

• Shattering the Simulacrum: Bolivia’s Structural Exhaustion

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The Colombian presidential election arrives tomorrow with a paradox that political scientists and analysts still seem oblivious to: the will of the markets.

In perspective. If the polls are correct, Iván Cepeda is likely to finish first in the opening round. If the betting markets are correct, however, he remains the underdog to ultimately occupy the Casa de Nariño. That contradiction says less about the candidates themselves than it does about the political legacy of Gustavo Petro. Colombia’s political mood today is fundamentally different from the one that carried Petro to power in 2022. Back then, the country was emerging from the social, economic and political dislocation of the pandemic years. Across Latin America, voters were punishing incumbents almost indiscriminately.

• Governments of every ideological persuasion were voted out as electorates searched for alternatives capable of addressing inflation, insecurity and declining living standards.

• Petro was one of the clearest beneficiaries of that moment. His victory was not simply a triumph of the Colombian left. It was part of a broader regional wave in which frustration with the status quo became more important than ideological conviction.

• The same forces that helped propel outsiders and opposition figures across the region ultimately elevated Petro to the presidency. Four years later, that cycle appears to be ending.

Between the lines. The challenge for Cepeda is that he is no longer running as the candidate of change. He is running as the candidate of continuity. Throughout Petro’s presidency, Colombians have watched a government struggle to deliver on many of its most ambitious promises while simultaneously facing growing concerns over security, fiscal stability and governability. The “Total Peace” strategy failed to reduce violence in many parts of the country and, in some regions, armed groups expanded their territorial influence.

• Economic growth remained sluggish, investor confidence deteriorated periodically, and the administration’s repeated confrontations with institutions reinforced perceptions of political instability.

• None of these problems alone would necessarily doom a governing coalition. Together, however, they have created a political environment that increasingly resembles a referendum on the last four years.

• That is where tomorrow’s election becomes misleading.

How it works. A first-round victory for Cepeda would likely reflect the fragmentation of the opposition rather than enthusiasm for the governing project. The Colombian right enters the election divided among multiple candidates, diluting its vote share and making it easier for the incumbent camp to finish first. Yet fragmentation in the first round does not necessarily translate into fragmentation in the second. In fact, the opposite often happens.

• The betting markets reflected in the graph above appear to be pricing precisely that scenario. And markets solve one of the biggest problems of universal suffrage: a single vote does not measure the intensity of preferences, but money does.

• While traditional polling still places Cepeda in a strong position for tomorrow, markets increasingly assume that anti-government voters will eventually consolidate behind whichever opposition candidate survives into the runoff.

• Abelardo de la Espriella’s sharp rise in market probabilities (62% of chances of becoming the next president) reflects less confidence in his individual candidacy than confidence in the existence of a broad anti-Petro majority. The numbers support that interpretation.

Why it matters. When the support of the various right-wing and center-right candidates is aggregated, the Colombian electorate still leans clearly away from the governing coalition. What appears to be a competitive race in the first round begins to look much less favorable for the left once voters are forced into a binary choice.

• Colombia may be experiencing a delayed version of a phenomenon already visible elsewhere in Latin America.

• Many of the challengers who rode the post-pandemic anti-incumbent wave into office eventually discovered that governing is considerably more difficult than campaigning.

• Voters who were willing to gamble on radical alternatives during moments of crisis often became more cautious once confronted with the practical consequences of those experiments. The Colombian left now faces the same reality.

In conclusion. Cepeda’s candidacy must convince voters not only that Petro’s presidency deserves another four years, but that the frustrations accumulated during this period are either exaggerated or temporary. That is an increasingly difficult argument to make in an environment where security has reemerged as a central political concern and where economic anxieties remain unresolved. Tomorrow will likely belong to Cepeda. November may not.

• The first round will reveal who has the most committed supporters, but the second round will reveal that Colombians no longer believe the political gamble they made in 2022 was worth repeating.

• Based on current trends, that answer appears very clear.

The diplomatic crisis that erupted between Chile and the United States over a proposed submarine cable to China is about much more than telecommunications.

In perspective. At first glance, the dispute appears technical, like a disagreement over infrastructure, regulatory approvals, and competing commercial interests. In reality, it reveals how the competition between Washington and Beijing is increasingly being fought through the invisible systems that sustain the global economy. The controversy emerged during Chile’s presidential transition after Washington revoked the visas of several Chilean officials linked to the proposed Chile-China Express project, a 20,000-kilometer submarine cable that would connect Valparaíso directly to Hong Kong.

• The move triggered a political confrontation between the outgoing administration of Gabriel Boric and the incoming government of José Antonio Kast, who ultimately distanced himself from the initiative and effectively killed it before taking office.

How it works. To understand why the reaction was so strong, it is necessary to understand what submarine cables actually are. They are not simply communications infrastructure, but the backbone of the digital economy. Roughly 95% of global internet traffic travels through them. Financial transactions, cloud computing, artificial intelligence systems, military communications, and ordinary internet activity all depend on networks that run across the ocean floor.

• For Chile, the attraction was obvious. A direct connection to Asia would reduce latency, lower costs and strengthen the country’s long-standing ambition of becoming South America’s principal digital gateway to the Pacific.

• The project carried potentially significant economic benefits. China is already Chile’s largest trading partner, receiving roughly 40% of the country’s exports, and a direct digital connection would further reinforce those ties.

• More importantly, it could position Chile as a regional hub for data centers, AI infrastructure, fintech companies and digital services. That economic logic, however, collided directly with Washington’s security concerns.

Why it matters. The issue was never really the cable itself. China already participates in numerous submarine cable projects around the world, including connections involving close American allies. The real concern lies in who controls the systems that manage the traffic flowing through those networks. Under the Chile-China Express proposal, Chinese companies would have operated both the infrastructure and the software responsible for managing communications on the Chilean side of the project.

• For the United States, that distinction is critical. Chinese companies are legally obligated to cooperate with state intelligence services when requested by Beijing.

• This transforms what might otherwise be a commercial project into a potential national security issue. The concern, however, is not merely theoretical; China has already shown their cards when it comes to such projects.

• The 2018 revelations that data from the African Union headquarters in Addis Ababa had been transferred to servers in Shanghai remain one of the most frequently cited examples of the risks associated with Chinese-controlled digital infrastructure.

Between the lines. The cable controversy also reflects a broader reality that extends far beyond Chile. Over the last decade, China’s economic presence in Latin America has expanded steadily into sectors that many governments increasingly consider strategic. Ports, electricity transmission networks, mining projects and telecommunications infrastructure have all become areas of growing Chinese investment. Peru’s Port of Chancay has become perhaps the clearest example of this trend, raising questions about how much control states should retain over critical infrastructure financed by foreign capital.

• In early 2026, a Peruvian court ruled that the national regulator, Ositrán, could not supervise or inspect the Port of Chancay because the infrastructure had been financed and developed as a private project rather than through a traditional state concession.

• The decision effectively removed ordinary government oversight from what is now the most important port project in South America. While entirely legal under Peru’s constitutional and regulatory framework, the ruling allowed Cosco Shipping, a Chinese state-owned enterprise, to operate critical infrastructure with significantly reduced state supervision.

• The episode demonstrated how Beijing can use domestic laws and private investment mechanisms to obtain influence over strategic assets without directly confronting national sovereignty. That is not a helpful precedent for the Chilean submarine cable.

Yes, but. From Beijing’s perspective, these investments are natural extensions of commercial expansion. From Washington’s perspective, they represent the gradual construction of a technological and logistical ecosystem that could eventually challenge American influence throughout the hemisphere.

• That is ultimately why the Chile cable dispute matters. It demonstrates that the next phase of great-power competition in Latin America is unlikely to revolve around military bases or ideological alignments.

• It will revolve around who owns, manages and controls the infrastructure through which information flows.

In conclusion. Chile may have decided against this particular project, but the underlying dilemma is not going away. China remains too important economically to ignore, while the United States remains too important strategically to alienate. Increasingly, countries across Latin America will find themselves navigating that same tension. The challenge will not be choosing one side or the other.

• The underlying dilemma will be finding a way to engage both without surrendering the strategic autonomy that allows them to make those choices in the first place.

Bolivia is currently experiencing a critical breakdown in governability as widespread civil unrest and highway blockades paralyze the administration of President Rodrigo Paz. Six months after taking office, the right-leaning government faces intense pressure from social movements and labor unions demanding the executive’s resignation.

• This immediate political crisis is the violent manifestation of a severe macroeconomic breaking point. The systemic volatility is deeply rooted in structural distortions accumulated over nearly two decades of rent-dependent state expansion under the Movement for Socialism (MAS) administrations.

The structural inheritance. The acute vulnerability of the Paz administration is fundamentally a consequence of the collapse of the state-led, natural gas-rentier model established during the commodity boom under previous MAS governments. For nearly two decades, the state relied on high hydrocarbon export revenues to subsidize the domestic economy, maintain an artificial currency peg, and expand public expenditure without diversifying the productive base. As gas reserves depleted due to a lack of exploration and capital investment, the primary engine of public revenue transformed into a structural deficit. This long-term macroeconomic decline has now translated into fiscal strangulation, severe dollar shortages, and an unsustainable fuel-subsidy trap, depriving the current executive of the financial resources required to manage domestic conflict or stabilize the market.

• A systemic decline in natural gas production transformed the country from a regional energy exporter into a net hydrocarbon importer, draining liquid foreign reserves.

• The legacy of a rigid fixed exchange rate and extensive fuel subsidies created deep market distortions that now accelerate central bank reserve depletion.

• The historic failure to diversify away from gas extraction left local industries structurally incapable of absorbing external shocks or generating autonomous sources of foreign currency.

How it works. The ongoing gridlock has metastasized through a dangerous intersection of territorial geography and political survival, squeezing the Paz administration into a corner. Bolivia’s centralized transport infrastructure renders critical nodes—the political capital of La Paz, the agro-industrial powerhouse of Santa Cruz, and the coca-growing stronghold of the Chapare—highly vulnerable to targeted highway blockades. Exploiting this spatial fragility, former President Evo Morales is coordinating an aggressive destabilization campaign from the Chapare to pressure the executive and derail a court-ordered arrest warrant charging him with statutory rape and human trafficking. However, while Morales exploits these tactical choke points in pursuit of personal legal immunity, the broader civil unrest reflects an unavoidable structural reality: the ultimate fracturing of a hollow rentier simulacrum that can no longer afford to finance domestic peace.

• Severe geographical and topographical constraints concentrate Bolivia’s logistics into narrow valley corridors, making major urban centers exceptionally vulnerable to total isolation through minimal disruption.

• The inevitable push toward austerity-driven adjustments by Paz directly dismantles a decades-long social contract founded on extensive public subsidies, cheap energy, and state-guaranteed purchasing power.

• Beyond immediate partisan manipulation or Morales’s role as an accelerator, the widespread civil unrest represents an organic, bottom-up reaction to the material collapse of an unsustainable rentier state.

Between the lines. President Rodrigo Paz’s stabilization campaign—anchored by aggressive fiscal austerity and the reduction of long-standing fuel subsidies—has triggered an acute governance crisis wrapped in a highly charged geopolitical environment. This bold policy shift is severely constrained by an immediate liquidity dilemma, where crushing near-term debt-service obligations intersect with elevated international risk premiums that paralyze traditional refinancing and rollover mechanisms. As this financial stranglehold intensifies pressure on remaining central bank reserves, the administration faces a razor-thin margin for error. The survival of these structural corrections ultimately depends on moving away from unilateral decrees and directly integrating bottom-up social veto players into fiscal negotiations, as sustained exclusion will inevitably trigger a broader institutional implosion.

• Severe near-term debt-service obligations and highly restrictive rollover conditions create an acute currency crunch that accelerates reserve depletion and aggravates inflationary pressures.

• The viability of Paz’s fiscal adjustment hinges on incorporating fragmented, bottom-up social movements into the structural dialogue to prevent a total collapse of public order.

• Restoring macroeconomic stability is a non-negotiable prerequisite for Bolivia to successfully leverage its vast lithium and critical mineral reserves within global upstream value chains during the current AI boom.

In conclusion. The current breakdown under the Paz administration demonstrates that the profound economic distortions inherited from the previous rentier model cannot be resolved through technocratic isolation. Bolivia stands at a definitive crossroads where immediate financial stabilization must coexist with a reconstructed domestic political settlement. If the executive fails to convert its top-down austerity framework into a negotiated consensus with decentralized veto actors, the state risks descending into sovereign default and chaotic territorial fragmentation.

• Ultimately, the administration’s capacity to navigate this crisis depends on its ability to restore order quickly enough to capture the strategic opportunities emerging from global technology and critical mineral markets.