S&P Criticizes Colombia Capital Controls

Colombia should give up capital controls, which haven’t worked yet and will further distort the economy if left in place, according to S&P. “If a measure is not successful in the short term, it’s better to abandon it,” says Victor Hererra, managing director at the ratings agency. Jane Eddy, S&P’s head of LatAm corporate and government ratings, adds that the measure could well be distorting, and also says that the appreciation of the peso may not be cyclical. They were speaking at a press conference in Bogotá. Bankers say the capital controls could also drive Colombian equity issuers offshore, including to the Brazilian market. Separately, S&P says it wants to see sustained solid growth, a better fiscal situation and lower debt before raising Colombia to investment grade. There are also concerns about political stability. The market expects an upgrade in 2008.