MEXICO CITY and WASHINGTON—The magnitude 7.4 earthquake that struck western Colombia on August 10 claimed over three hundred lives and caused heavy damage radiating out from the town of San José del Palmar. The Colombian president has pegged the reconstruction costs at around $9.6 billion, including about $8 billion for housing recovery and about $1.6 billion for infrastructure reconstruction. Mayors of affected cities, including Alejandro Eder from Cali and Mauricio Salazar from Pereira, have said recovery could take around three to five years.
The urgent priority is humanitarian response. But as Colombia begins to shift to the second stage of rebuilding (as the country’s foreign minister explained at an Atlantic Council event in August), the question is how to finance recovery at the scale required and for the timeline that is required. The full scale of the damage across households, local governments, national infrastructure, and other assets not covered by insurance creates a policy challenge for Colombia. But there is a strategic opening for partners, including the United States, to support reconstruction in ways that strengthen Colombia’s resilience and the transparency of Bogotá’s standards and policies.
Where the main damage is
The earthquake damaged homes more than any other category of infrastructure. Unfortunately, housing is also the category of infrastructure that is hardest to finance. Only about 9.3 percent of households have insurance for their property, and earthquake coverage is compulsory only where a mortgage is attached. Many Colombian owners hold their homes outright, through payment or inheritance, and therefore fall outside the mortgage system that would have required coverage. For many families whose homes were destroyed, rebuilding will depend on public support, savings, donations, or new financing.
Water systems are another major concern. In the port city of Buenaventura—where locals have rationed water for decades, receiving it only once every three days—the earthquake intensified existing water infrastructure challenges.
The electricity grid also faces pressure. Grid operator XM estimated losses equivalent to 18 percent of national electricity demand, and utility company Celsia reported more than 450,000 customers without power immediately following the earthquake. Distributors were already short on financing, with debts totaling $2.1 billion. Regulators and utilities will need to determine how to finance catastrophe-related repair costs without worsening affordability concerns for consumers.
Some aid has arrived, but reconstruction will require more
Humanitarian assistance has begun flowing to Colombia, including $26.5 million from the US Department of State. Other partners have followed: the European Union has mobilized around $2.4 million plus in-kind assistance through its Civil Protection Mechanism, Canada has committed more than $1.5 million through humanitarian partners, and Vietnam and the Vatican have sent smaller grants.
Washington did indicate just before the earthquake its intention to deliver one billion dollars in security assistance to Colombia, but that isn’t reconstruction money (and it has not yet been approved by Congress). The World Bank has also sent support, but the figure most widely reported ($450 million) represents a facility rather than a grant. In the initial days after the earthquake, the development bank paid Colombia $200 million from that facility, but that is a loan that will need to be paid back with interest. The Inter-American Development Bank has made a $300 million contingent facility available.
Much of the financing headed in Colombia’s direction is credit. Colombia previously had access to a different type of instrument through the World Bank: a $400 million catastrophe bond that moved the financial risk of a major earthquake to investors: they earned interest while the bond ran, and if an earthquake struck, their principal, not Colombia’s budget, would fund the payout. But that instrument lapsed in February 2021 and was not renewed. As Colombia rebuilds, restoring risk-transfer coverage could help reduce the fiscal burden of future disasters. The bottom line: The full extent of Colombia’s reconstruction will take much more support.
Infrastructure recovery matters for Colombia’s competitiveness
Resilient transportation, water, energy, and logistics infrastructure will shape how quickly affected regions can recover and how competitive they will be in the years ahead.
There are several opportunities for US entities to support the building of resilient infrastructure. One is the Cali airport. The project to expand and modernize it is a thirty-year project valued at about $1.6 billion. No contract has been signed yet, and it is reportedly due for award by April 2027 (although the timetable has moved repeatedly). The main Cali airport building suffered minor damage during the earthquake and will require upgrades to support reconstruction efforts in the region. But such upgrades could make a big impact locally.
The US Department of Commerce has raised concern about investment barriers such as a lack of regulatory transparency and competitive-bidding conditions. Such factors have limited US participation in key infrastructure and project-management opportunities in Colombia. That is certainly a challenge, but there is a path forward: Colombia could make meaningful reforms to improve such transparency, risk allocation, and bankability. Doing so would make Colombia’s reconstruction pipeline more attractive to US investors and uplift the country as reconstruction continues to unfold.
How the United States can support reconstruction beyond humanitarian aid
There are four ways Washington could financially support Colombia’s recovery and resilience—and potentially benefit US stakeholders in the long run.
First, the US International Development Finance Corporation (DFC) can play a larger role. Its active portfolio in Colombia is $1.13 billion across twenty-five projects, the most of any other country in the hemisphere. But twenty-two of those projects are lending guarantees to banks and microfinance lenders, and the one infrastructure commitment is a 2019 guaranty on local-currency bonds. While DFC has a significant number of projects in Colombia, its financial commitments trail those made to several other countries in the region, and there have been no new commitments since 2023. That suggests there is room to expand.
The gap matters for recovery. None of the eleven utility projects in DFC’s active hemisphere portfolio is in Colombia, and the newest dates to fiscal year 2023, though utilities are among the sectors most central to reconstruction. In any future commitments, the DFC could move away from bank guarantees toward direct debt and equity in Pacific coast utility networks and critical infrastructure.
Second, US private capital will need incentives to enter projects that currently appear risky to finance. The DFC and Export-Import Bank of the United States should offer political risk insurance, first-loss capital, and blended-finance structures to help make Colombian water, power, and transportation assets more bankable.
Third, the US private sector should, when offering financing, reinforce the need for transparent contracting standards in Colombia, including requirements for published risk matrices, competitive awards, and the incorporation of seismic risk in infrastructure contracts and risk matrices. The US Commercial Service, an arm of the US Department of Commerce in Colombia, could help by working closely with the Colombian National Infrastructure Agency to discuss such standards.
Fourth, the United States should reconsider how its tariff strategy applies to a recovering country such as Colombia. Following the earthquake, de la Espriella urged US President Donald Trump to waive Section 301 tariffs, while Colombian trade authorities began expedited talks with the Office of the US Trade Representative to negotiate reciprocal tariff relief under an Agreement on Reciprocal Trade. Those negotiations should take as their baseline the terms of the US–Colombia Trade Promotion Agreement (CTPA), which entered into force in 2012.