October 26, 2017 / 4:27 PM / 4 months ago

Fitch Affirms Colombia at 'BBB'; Outlook Stable

(The following statement was released by the rating agency) NEW YORK, October 26 (Fitch) Fitch Ratings has affirmed Colombia's Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'BBB' with a Stable Outlook. A full list of rating actions follows at the end of this release. KEY RATING DRIVERS The 'BBB' rating reflects Colombia's long track record of credible, flexible and consistent macroeconomic policies as well as a record of macroeconomic and financial stability. Colombia's ratings are constrained by high commodity dependence, limited fiscal flexibility and structural constraints in terms of low GDP per capita and weak governance indicators compared to peers. Colombia's economy has adjusted to the sharp fall in oil prices and terms of trade have started to improve. After widening to 6.4% of GDP in 2015, the current account deficit fell to 4.3% in 2016. The current account deficit is expected to fall further to 3.8% of GDP in 2017, largely due to a pick-up in exports driven in part by higher average oil prices as well as solid performance of non-traditional exports. Inflation fell to within the central bank's 3+/-1% target in 2017, after rising to nearly 9% in July 2016 partly as a result of the sharp peso depreciation. Year-end inflation is expected to continue to fall to 3.6% in 2018. However, the economic adjustment has entailed an extended sharp slowdown in growth. Colombia's economy is expected to grow by just 1.9% in 2017 after growing by 2% in 2016. Fitch forecasts an acceleration in growth in 2018 to 2.8% as public infrastructure spending picks up and domestic demand improves due to cuts in interest rates. The fiscal deficit is on a downward path and Fitch expects the government to reach its revised central government fiscal deficit target of 3.6%. Its 2018 target of 3.1% of GDP is credible, based on expenditure restraint, especially in capital expenditures, as well as additional revenues from the tax reform that passed in December 2016. Colombia's general government debt to GDP ratio has stabilized at close to 47%. However, further deficit narrowing, as stipulated by the Structural Balance Rule, will prove difficult without additional revenue measures beyond 2018. Further fiscal measures would be needed to begin to reduce the government's debt burden, which is above the 'BBB' median of 42% of GDP, and to increase fiscal room to meet future shocks. Colombia's external debt metrics compare unfavourably to peers. However, Fitch expects Colombia's gross external debt to gradually fall after peaking at 262% of current account receipts in 2016. The reduction in the current account deficit and a substitution of local debt for external debt by the private sector are driving the trend. Colombia's international reserves have gradually increased to just over USD47.5 billion since 2016. In addition, Colombia's external liquidity is supported by an IMF Flexible Credit Line of USD11.35 billion. FDI is expected to cover over fifty percent of Colombia's gross external financing needs of nearly USD19 billion in 2018. A presidential and legislative election cycle begins March 2018. Fitch does not expect major changes to its macroeconomic policy framework from the next administration, no matter who wins the presidency. One of the key policy challenges for the next administration will be the implementation of the peace agreement with the FARC guerrillas in the context of a fiscal adjustment as stipulated by the Structural Balance Rule. SOVEREIGN RATING MODEL (SRM) and QUALITATIVE OVERLAY (QO) Fitch's proprietary SRM assigns Colombia a score equivalent to a rating of 'BBB-' on the Long-Term Foreign-Currency (LT FC) IDR scale. Fitch's sovereign rating committee adjusted the output from the SRM to arrive at the final LT FC IDR by applying its QO, relative to rated peers, as follows: --Macroeconomic: +1 notch, to reflect Colombia's long track record of prudent and consistent macroeconomic policies. Fitch's SRM is the agency's proprietary multiple regression rating model that employs 18 variables based on three-year centred averages, including one year of forecasts, to produce a score equivalent to a LT FC IDR. Fitch's QO is a forward-looking qualitative framework designed to allow for adjustment to the SRM output to assign the final rating, reflecting factors within our criteria that are not fully quantifiable and/or not fully reflected in the SRM. RATING SENSITIVITIES The main factors that could individually, or collectively, lead to a negative rating change include: --Persistent period of low economic growth that undermines fiscal performance --Failure to reduce the fiscal deficit and stabilize the government's debt burden; --Re-emergence of large external imbalances that lead to continued increase in the external debt burden. Future developments that could individually, or collectively, result in a positive rating change include: --Fiscal consolidation that results in a significant reduction of the public debt burden; --Higher growth prospects that supports improved debt dynamics and improves Colombia's income gap with higher-rated sovereigns; --A sharp reduction in the country's external vulnerabilities. KEY ASSUMPTIONS Fitch assumes the oil price averages USD52.5 in 2017, USD52.5 in 2018 and USD55 in 2019. Fitch has affirmed Colombia's ratings as follows: --Long-Term Foreign-Currency IDR at 'BBB'; Outlook Stable; --Long-Term Local-Currency IDR at 'BBB'; Outlook Stable; --Short-Term Foreign-Currency IDR at 'F2'; --Short-Term Local-Currency IDR at 'F2'; --Country Ceiling at 'BBB+'; --Issue ratings on long-term senior unsecured foreign-currency bonds at 'BBB'; --Issue ratings on long-term senior unsecured local-currency bonds at 'BBB'. Contact: Primary Analyst Richard Francis Director +1-212-908-0858 Fitch Ratings, Inc. 33 Whitehall Street New York, NY 10004 Secondary Analyst Kelli Bissett-Tom Associate Director +1-212-908-0564 Committee Chairperson Charles Seville Senior Director +1-212-908-0277 Media Relations: Benjamin Rippey, New York, Tel: +1 646 582 4588, Email: benjamin.rippey@fitchratings.com. Additional information is available on www.fitchratings.com Applicable Criteria Country Ceilings Criteria (pub. 21 Jul 2017) here Sovereign Rating Criteria (pub. 21 Jul 2017) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here Solicitation Status here#solicitation Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. DIRECTORS AND SHAREHOLDERS RELEVANT INTERESTS ARE AVAILABLE here. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Copyright © 2017 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch’s factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch’s ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided “as is” without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below