Colombia Moves Closer To Investment Grade

Colombia has moved closer to securing an investment-grade rating after Standard & Poor’s raised its long-term foreign currency sovereign credit rating on the Republic to BB+ from BB, just one notch below the level needed. “The upgrade is supported by Colombia’s significantly improved growth prospects and fiscal performance,” said S&P credit analyst Richard Francis. Nevertheless, the ratings agency emphasized the need for further tax and pension reform to improve the government’s fiscal prospects and lighten the debt burden, which would in turn lead to higher creditworthiness. It warned that “significant fiscal slippage or a sharp deterioration in national security” could, in contrast, have the opposite affect. US investment house Goldman Sachs, commenting on the upgrade, felt the ratings action was earned and thought that “consolidating and deepening the fiscal adjustment should remain the top priority for Uribe’s second presidential term”. It added that progress in this area could lead to an upgrade from Fitch in the “immediate future”, as well as Moody’s. Goldman concluded that Colombia could reasonably expect to achieve investment grade status “towards the end of 2008 or beginning of 2009”.