December 4, 2012 / 3:10 PM / in 5 years

TEXT - S&P affirms Bogota Distrito Capital rating

     -- Bogota Distrito Capital has a strong budgetary performance, moderate 
debt levels, and an adequate liquidity position. The District's financial 
management is predictable, in our view, and it has shown stability during 
government changes.
     -- We are affirming our 'BBB-' issuer credit rating on Bogota. The 
outlook remains stable.
     -- During the next two years, we expect Bogota's budgetary performance to 
remain strong, its liquidity position to compare positively with its financial 
obligations, and its debt level to stay moderate despite the projected 

Rating Action
On Dec. 4, 2012, Standard & Poor's Ratings Services affirmed its 'BBB-' issuer 
credit rating on Bogota Distrito Capital (the Capital District of Bogota). The 
outlook remains stable. At the same time, Standard & Poor's affirmed its 
'BBB-' rating on Bogota's Colombian pesos (COP) denominated (equivalent to 
US$300 million) senior unsecured notes due in 2028.

The rating on Bogota reflects its strong budgetary performance, including 
operating and capital expenditure surpluses during the last two years, which 
we expect the District to maintain through year-end 2012 and in 2013. The 
rating also reflects Bogota's moderate debt level that, despite its projected 
increase, shouldn't put considerable pressure on the District's finances; and 
the District's consistently adequate liquidity position with respect to its 
financial obligations, as well as our view of its predictable financial 
management, which has shown stability during government changes and political 

The offsetting factors include Bogota's economy, specifically its GDP per 
capita, which is still relatively weak compared with other cities we rate in 
Latin America, even though we expect it to continue growing at an average rate 
of about 4% in 2012 and 2013. Another offsetting factor is the important 
infrastructure needs the District faces, which involves significant pressure 
on capital investment in the next few years.

As of September 2012, the District's operating surplus was COP3.4 billion, 
equivalent to 58.2% of operating revenues and a surplus after capital 
expenditure of 21% of its total revenue. These results are slightly better 
than those recorded during the same period last year, reflecting the 
District's proper budgetary controls and an effective revenue collection 
policy. In our base case scenario, we project operating surpluses of more than 
50% of operating revenue and a surplus position after capital expenditures by 
year-end 2012 and in 2013, which would be consistent with those reported in 
the previous two years. 

Bogota's operating surplus is significantly higher than that of other cities 
that we rate, such as Moscow (BBB/Stable/--), which has reported average 
operating surpluses of 18% of its operating revenue over the last three years, 
or Queretaro (BBB-/Stable/--), which reported balances averaging 22% during 
the same period. We believe that Bogota's strong budgetary performance will 
remain a key rating factor going forward.

The District's strong budgetary performance has allowed it to finance its 
capital investment program and meet its operational needs without increasing 
its debt levels during the last three years. The District's direct debt 
totaled COP1.6 billion as of September 2012, which would represent 
approximately 21% of its operating revenues by year-end 2012, and we estimate 
its debt service at COP385 billion, which is equivalent to about 5% of 
operating revenues.

Bogota's debt level compares favorably with cities such as Barcelona 
(BBB-/Negative/A-2) or Rio de Janeiro (BBB/Stable/--), whose debt levels were 
equivalent to 57% and 64% of operating revenues, respectively, in 2011. We 
estimate that Bogota's debt service will average about COP200 billion in 2013 
and 2014, based on the projected amortization schedule. Since 71% of Bogota's 
total debt is denominated in Colombian pesos and the remainder in U.S. 
dollars, we do not believe there is significant currency risk. In addition, 
although the District's debt level is projected to increase to finance mainly 
urban mobility projects during the next few years (totaling COP4.3 billion, 
according to its development plan for 2012-2016), we do not expect this 
increase to exert significant pressure on the District's financial profile in 
2013 and 2014. We also believe that the District's pension system, which is 
not fully funded, will not represent a significant financial burden during the 
next three years. The pension fund reserves totaled COP3.1 billion in June 
2012 and were equivalent to 40% of total pension liabilities, compared with 
34% a year earlier.

Bogota has maintained a stable and predictable financial management, even in 
periods of government changes and political crises. In particular, the 
District has adequate long-term planning mechanisms and fiscal policy, which 
provide adjustments to its revenue sources to meet future financial 
commitments and maintain an adequate control of public expenditure, 
conservative debt policy that maintains a long-term profile, and advanced 
management of liquidity. We expect that the district's sound financial 
administration will remain a positive rating factor.

Bogota has high flexibility on the revenue side, compared with its national 
and international peers. Its revenues from taxes and obligations have 
increased consistently over the last two years, reaching 74% of operating 
income as of September 2012, which represented an increase from 71.4% as of 
year-end 2011, which compares positively with most of its peers in the 'BBB' 
rating category. On the expenditure side, Bogota has a relatively more limited 
financial flexibility because of its education and health care 
responsibilities and given that its urban infrastructure needs will require a 
significant investment in the next few years.

Bogota's economy accounts for 26% of the national GDP, primarily due the 
service and commerce sectors. Historically, Bogota's economy has been linked 
to the country's economic performance, and we expect it to grow at an average 
rate of about 4% during 2012 and 2013. However, our estimated GDP per capita 
of US$10,400 for 2011 is still lower than those reported by other cities in 
the 'BBB' rating category, such as Queretaro, which has a GDP per capita of 
US14,000. Furthermore, a high proportion of the economically active population 
is in the informal economy (the part of the economy that has no affiliation to 
social security and is not taxed, monitored by any form of government, or 
included in the GDP) and the unemployment rate remains relatively high, at 
close to 10%.

We assess the Bogota liquidity position as adequate, as in previous years. As 
of September 2012, the District recorded COP3.6 billion of unrestricted cash 
and COP790 million of short-term accounts payable. The cash available as of 
year-end 2011 was equivalent to 6x total debt service in 2012. Bogota 
maintains a cash investment policy that is clearly defined and relatively 
safe, in our view. However, the District's liquidity position may weaken as a 
result of its capital investment plans, but we expect it to remain adequate. 

Bogota does not face considerable contingent liabilities. Its main independent 
public entities, which include energy company Empresa de Energia de Bogota S.A 
E.S.P. (BBB-/Stable/--), Acueducto de Bogota S.A. ESP (not rated), and Empresa 
de Telecomunicaciones de Bogota S.A. (not rated), are self-supporting, and we 
do not expect them to require extraordinary support from the District in the 
near future.

The stable outlook reflects our expectation that Bogota will maintain its 
strong budgetary performance, an adequate liquidity position with respect to 
its financial obligations, and a conservative debt policy during the next two 

We could lower the rating if Bogota's budgetary performance or liquidity 
position deteriorates due to significant changes in its financial policies or 
if its debt level increases above our expectations. Conversely, we could raise 
the rating if the District's sustained economic growth, which is reflected in 
its revenue sources, allows it to finance capital investments in the next few 
years without additional borrowing.

Related Criteria And Research
Methodology For Rating International Local And Regional Governments, Sept. 20, 

Ratings List
Ratings Affirmed

Bogota Distrito Capital
 Issuer Credit Rating                   BBB-/Stable/--     
 Senior Unsecured                       BBB-

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