Standard and Poor’s upgraded Colombia’s foreign denominated debt rating to investment grade last week. The rating agency’s decision boosts market confidence in Colombia amid responsible macroeconomic management. Good macro management should come hand in hand with eradicating corruption practices in public and private transactions, as the ongoing corruption scandals in Bogota and across the country belie. Otherwise, the continued pilfering of public monies threatens to become a fiscal burden and an obstacle for conducting business.
S&Ps’ decision, expected by Colombian policymakers and long-internalized by markets as a result of the agency’s 2010 upward outlook for Colombia, reflects the relative sound macroeconomic environment of the Andean country. Credit agencies downgraded Colombia’s rating twelve years ago after the country underwent a banking and mortgage crisis. Increased insecurity and alleged inability of the government to control its territory also contributed to the downgrade. But unlike Argentina, Ecuador, and Venezuela, Colombia has had a historical responsible macroeconomic management, a solid independent Central Bank, and a credible commitment to service its obligations.
The upgrade comes despite implementation of pending macroeconomic reforms. Although fiscal policy still is moderately inflexible thanks to numerous constitutionally mandated obligations, Continue reading