The 22-year old Colombian will spend a season in Argentina in order to gain first team development in a senior environment.
"Jose is a young and talented player who needs consistent playing time in order to continue in his development," said Timbers general manager Gavin Wilkinson.
"With the addition of Gaston Fernandez, we felt it was best for Jose to go on loan. Olimpo is excited to have Jose on loan and the club will provide him the opportunity to gain valuable experience in a top league and will continue to push him in his development."
The Colombia U20 international arrived at Portland from homeland club Santa Fe on a permanent deal in January 2013 after missing the 2012 MLS season on loan due to a knee injury. He made 21 league appearances for one goal and three assists last year.
For breaking stories and all the great banter like us on Facebook: facebook.com/tribalfootball