Colombia faces economic challenges while maintaining stable credit ratings.

In a complicated economic context, Colombia has managed, so far, to avoid a downgrade in its credit rating by the major rating agencies, Standard & Poor's, Moody's, and Fitch, during President Gustavo Petro's administration. The current evaluations still reflect a situation of "satisfaction" in general terms, with ratings of BB+, Baa2, and BB+ respectively. However, the agencies' perception has begun to show signs of concern, especially with the change in Moody's and Fitch's outlook from "stable" to "negative." This shift responds to growing worries about the country's high indebtedness, weak economic growth, and difficulties in adhering to the fiscal framework. The impact of credit ratings is crucial for international monetary flows, as they guide investors in their decisions about whom to lend to or invest in. A high-level rating, such as triple A, can mean low interest rates and high confidence in repayment. In contrast, Colombia navigates an intermediate space that involves moderate risks and an uncertain outlook for the future, which could complicate its ability to attract foreign investment. José Antonio Ocampo, former Minister of Finance, expressed concern about the lack of progress towards recovering investment grade, which is essential for many investment funds to allocate resources to countries like Colombia. This rating acts as a threshold that allows investors to assess the associated risk. Falling below this level implies greater speculation and, therefore, higher interest rates, which in turn increases the cost of financing. The risk premium, measured in basis points, is another critical indicator that reflects the perception of risk in investments. As investors consider Colombian debt to be riskier, they demand higher returns as compensation. This has led to any financing needs translating into higher interest rates, creating a vicious cycle that affects debt sustainability. The current context also recalls Colombia's recent history, marked by downgrades during the previous administration. In 2021, the decisions by Standard & Poor's and Fitch to downgrade Colombia's rating were a harsh blow that evidenced the fragility of creditor confidence in the country's economy, following a strong wave of indebtedness to mitigate the effects of the pandemic. Despite the persistence of current ratings, the economic situation remains precarious, and recent data on GDP growth has generated both skepticism and optimism. While GDP grew by 4.1% in the second quarter, mainly driven by construction, analysts warn that this is not indicative of long-term recovery, but rather a temporary effect that does not translate into a favorable investment climate. Uncertainty also stems from fiscal policy and the reforms implemented. Although the fiscal deficit has been reduced, projections for the future suggest an increase, which could jeopardize the credit rating. The business sector is calling for a more proactive approach to generate confidence and attract investments that are essential for the country's sustainable growth. Rating agencies have also noted that Colombia has improved its current account deficit, which is a positive sign for investors. However, the reality is that investment in the country has significantly decreased in recent years, posing serious challenges for the Colombian economy. With a rapidly changing global landscape, it is essential for Petro's government to adopt measures that revitalize investment and strengthen market confidence. The challenge will be to establish a balance between the need to implement responsible fiscal policies and the urgency to stimulate the economy in a context of uncertainty. The decisions made by the government in the coming months will be crucial in determining not only Colombia's credit rating but also the future of its economy and its capacity to face the challenges ahead. Colombia's ability to avoid a downgrade in its credit rating will depend on its ability to efficiently and effectively address these economic challenges, ensuring that necessary reforms are implemented without compromising fiscal stability. As the country moves forward in this situation, attention will be focused on how the government manages both internal and external expectations and whether it can reverse the decline in investment that has marked the economy in recent years.