Colombia must finance up to 2% of GDP in reconstruction with a deficit that is already 8%

What happened

At 7:34 on 10 August, a magnitude 7.4 quake at a depth of 96 km, centered on San José del Palmar in Chocó, struck western Colombia. According to the Servicio Geológico Colombiano, it is the strongest recorded in the country since 1979.

The toll changed every day of the following week: 71 dead on 10 August, 281 on the 13th, 294 on the 16th, plus around 4,000 injured. Official records count 13,000 homes destroyed, 79,000 damaged and more than 120 buildings in total collapse, along with damage to 2,612 education centers, 241 health centers, 59 water supply systems and 5 airports. In all, 448 municipalities across 15 departments, with Valle del Cauca, Chocó, Risaralda, Caldas and Quindío among the hardest hit.

The country declared a national disaster. This analysis does not deal with the rescue or with humanitarian aid, both widely covered. It deals with who pays the bill that comes afterward.

The bill, and why it is fiscal

Two independent calculations arrived at the same range. Juan Camilo Restrepo, a former finance minister who held the post during the 1999 earthquake, estimates reconstruction will cost between one and two points of GDP. Luis Fernando Mejía, director of an economic consultancy, reaches 1% to 2% of GDP by the same route.

In pesos, that is 20 to 40 billones. A warning is due here: billón, in Spanish, means a million millions — what English calls a trillion, not a billion. Converted at the exchange rate on the day of the earthquake, 3,139.4 pesos per dollar, those 40 billones are around US$ 12.7 billion — not US$ 40 billion, as a hurried reading of the headline suggests.

The problem is not the absolute size of the bill. It is where it lands.

Colombia runs a fiscal deficit close to 8% of GDP, about 160 billones of pesos, or something like US$ 51 billion. Reconstruction is equivalent to between 12.5% and 25% of a full year's shortfall, on top of central government debt already at 71.2% of GDP.

Mejía projects that roughly 65% of the cost falls on the public budget, 30% on international cooperation and 5% on private donations. In other words: two thirds of the bill is a domestic fiscal problem, and a third depends on money that has not yet been pledged.

The government has stated it will not raise taxes. The economists interviewed consider it likely that this position will have to be revised as the real scale of the damage is measured. It is that tension — certain spending, undefined revenue, a political promise made — that defines the event economically.

Restrepo proposed treating reconstruction as a large-scale recovery plan, run, in his words, "in a glass urn and with strong management". The government announced the "Plan Milagro de Reconstrucción", with resources centralized in a "Fondo Milagro". Construction industry bodies are asking for a single dedicated management structure, with transparency rules of its own.

Buenaventura

The second axis of the shock is logistical, and it is specific.

Buenaventura hosts one of the country's main port complexes. Between January and September 2025, according to the Superintendencia de Transporte, its port zone moved 16.4 million tons — 20.8% of all cargo moved by Colombia's public-service port operators. Containers, raw materials, vehicles and merchandise come in and out through it.

The complex's activity was interrupted by the earthquake.

A port accounting for a fifth of the country's cargo is not substitutable in the short term. Cartagena and Santa Marta sit on the Caribbean, on the other side of the territory, and serve different routes; the nearest alternative on the Pacific involves Panamanian ports. Every detour adds cost and days, and that reaches the consumer through the price of imported goods before it shows up in any fiscal statistic.

There is an asymmetry that the local coverage itself points out: the city that connects Colombia to the world lives with severe shortfalls in housing, public services and connectivity. The images that came out in the following days show façades, roofs and structures compromised across several districts — and a food distribution operation that had to hire transport to reach neighborhood by neighborhood.

What the exchange rate says, and what it does not

Here is the measurement the coverage of the period did not make.

If the market had read the earthquake as a threat to Colombian solvency, the first place it would show up is the exchange rate. It did not. In our daily series, the peso stood at 3,155.9 per dollar on 9 August, the eve of the disaster, and at 3,131.6 on the 17th. The peso appreciated 0.8% in the week of the earthquake.

There was no flight.

This is consistent with the financing design: public budget and international cooperation do not generate immediate demand for hard currency, unlike an emergency external issuance. But it also means the market has not priced anything in yet — neither the worst case, nor the tax reform that may be coming.

That is why the exchange rate is the indicator to watch. It is the thermometer that has not risen.

It is worth recording that the peso's appreciation was already, before the earthquake, a problem flagged by the central bank's former governor: it squeezes exporting sectors. The disaster did not reverse that movement; if anything, it reinforced it at the margin.

Venezuela enters twice

The Colombian earthquake also hit Venezuela, and this is where the analysis has to separate what the coverage blends together.

Venezuela was already coming out of a disaster of its own. On 24 June, a double earthquake left 5,398 dead and around 1 million people in need of immediate humanitarian aid. The United Nations response plan for 2026 asked for US$ 931 million and had been covered by only 39%. Forty-seven days later, the quake of the 10th arrived.

The coverage of the period repeats, when dealing with the resumption of relations between the two countries, that the trade relationship "moved US$ 7 billion". It did move that — in 2008, before the political and economic collapse.

The trajectory since then, presented at the business congress that discussed the subject: it fell to US$ 222 million in 2020, rose to US$ 741 million in 2022, reached US$ 1.12 billion in 2024 and around US$ 1.17 billion in 2025. The projection for 2026 is US$ 1.6 billion.

In our data, trade between Colombia and Venezuela is worth US$ 1.0 billion. The coverage's series and ours converge. The headline figure is eighteen years old and overstates the current link by around seven times.

And there is the asymmetry, which is the point:

The same relationship is five times more important to Caracas than to Bogotá. Any reading that treats the rapprochement as a symmetrical opportunity is wrong about both sides.

For Colombia, the practical consequence of the Venezuelan earthquake added to its own is competition: the two reconstructions compete for the same international cooperation, the same cement and the same diplomatic attention. And the Venezuelan one is larger, with annual inflation of 544.13% and 51.6% of industrial capacity idle.

What reconstruction can turn into

None of the economists interviewed treated the scenario as inevitably bad, and that deserves recording.

Reconstruction is spending, but it is also activity. Construction and public works enter GDP, and the Colombian private sector signaled willingness to take part. The government is weighing mechanisms that already exist — "Obras por Impuestos" and the "Sistema General de Regalías" — to finance schools, health posts, roads and bridges. Housing delivery is projected for 2027 and 2028.

The strongest argument for that reading is the precedent: Armenia, destroyed by the 1999 earthquake, was rebuilt to earthquake-resistant standards and this time recorded no deaths.

But the boost runs in quarters, not weeks, and it charges the price up front. Whoever lost income in August is not necessarily whoever will be hired on site in 2027. In an economy where 44% of workers are in one-person businesses and informality reaches 97% in the lowest income bracket, the distance between "reconstruction creates jobs" and "affected families have income again" is larger than the aggregate suggests.

The real test, as one participant in the debate put it, is not the size of the announcement. It is the speed and the transparency with which the money reaches the ground.