Colombia maintains its credit rating, but faces increasing economic uncertainty.

Colombia has managed to maintain its credit rating despite the economic challenges it has faced during President Gustavo Petro's term. The three main credit rating agencies, Standard & Poor's, Moody's, and Fitch, have retained ratings of BB+, Baa2, and BB+, respectively. However, it is important to highlight that the economic perception of these agencies has changed, creating an atmosphere of uncertainty regarding the country's fiscal sustainability. Moody's and Fitch have changed their outlook from "stable" to "negative," reflecting concerns about the high level of debt and modest economic growth. The verdict of these agencies is crucial for international monetary flows, as they influence investor confidence and determine the interest rates that countries must pay on their debts. While a triple-A rating indicates high solvency and an almost negligible probability of default, Colombia's current ratings fall into a middle zone, marked by moderate risks and concerns about the future. Former Finance Minister José Antonio Ocampo has expressed his concern about the lack of a recovery outlook towards investment grade, which is a fundamental indicator for institutional investors. This rating is essential for attracting investment, as assets below this level are considered more speculative and, therefore, riskier. This can lead investment funds to refrain from investing in Colombian debt, opting for safer alternatives. The situation is further complicated by the rising risk premium differential, which measures the difference between the interest paid for high-rated investments and lower-quality ones, such as those from Colombia. This increase in risk translates into higher interest rates for the country, making external financing more expensive and further complicating the fiscal situation. Confidence in the Colombian economy has been a recurring theme since Iván Duque's administration, when several ratings were downgraded following the increase in debt during the pandemic. This context led to a rise in financing costs, affecting the government's ability to make necessary investments and meet its obligations. The recent announcement from Moody's, which maintains the Baa2 rating but changes the outlook to negative, has sparked a debate concerning the financial sector's confidence in the current government. Ocampo has pointed out that this deterioration is not new but rather an accumulated effect since the pandemic. The situation has been exacerbated by the government's difficulty in collecting taxes and adhering to its budget. The challenge for Colombia lies in the risk perception that investors have about the country. Low investment and modest economic growth exacerbate this negative perception. In the latest figures, GDP growth in the second quarter was 4.1%, partly driven by infrastructure projects, which has generated slight optimism. However, this growth is still not sufficient to reverse the negative trend. The fiscal outlook is a critical aspect in the evaluation of credit rating agencies. Although the fiscal deficit has decreased in recent years, projections indicate a possible increase. This has led to concerns about the sustainability of public finances and the government's ability to meet its obligations. Analysts agree that low investment is one of the main obstacles currently facing the Colombian economy. With a 10% drop in investment last year and a weak recovery thus far, this is an issue that needs urgent attention. Construction has shown signs of recovery, but a broader and more effective approach is needed to stimulate economic growth. In summary, although Colombia has managed to avoid a downgrade in its credit rating, the change in the outlook from the rating agencies underscores the challenges the country faces. Economic uncertainty, high levels of debt, and low investment are factors affecting investor confidence. Petro's administration will need to implement effective policies to stabilize the economy and attract investment so that the country can overcome these hurdles and regain its investment grade in the long term.