I requested info from the American Embassy in Bogota about my wife having our baby in Colombia and how that will affect the baby's citizenship and travel with the baby. I am posting what they said to share the knowledge.
"If the consul determines that you can transfer U.S. citizenship to the baby, you will receive a Consular Report of Birth Abroad which serves as documentation of U.S. citizenship. As far as traveling outside of Colombia, you will have to apply for U.S. and Colombian passports. You may apply for the U.S. passport on the same day that you apply for the Consular Report of Birth Abroad. It will take two weeks for your baby's passport to be ready--US embassies and consulates no longer produce passports except in extreme emergencies and only then for a very limited time. Now all passports are made at the National Passport Center in Portsmouth, NH.
You should also know that under Colombian law, your baby will automatically be a Colombian citizen (if born here) and therefore must always present a valid Colombian passport whenever leaving or entering Colombia (the U.S. has the same law--therefore your baby must forever exit Colombia with a Colombian passport and then enter the U.S. with an American passport and vice-versa). The Colombian government strictly enforces this law through heavy fines.
You will be eligible to transfer citizenship, considering that you have lived all your life in the US, as long as you are able to satisfy the consul that you are indeed the biological father. Please refer to the website for instructions on what is required to do so. We confirm U.S. citizenship in cases such as yours every day, so if everything is in order you have nothing to be concerned about.
Sincerely,
American Citizens Services
U.S. Embassy Bogotá
Bogotá, Colombia"
