Colombia's Outlook Is Raised to Positive by Moody's on Debt-Reduction Plan

Colombia’s credit rating outlook was raised to positive from stable by Moody’s Investors Service, which cited the government’s push to cut debt.

Moody’s rates Colombia’s foreign bonds Ba1, one level below investment grade. Standard & Poor’s ranks its foreign bonds one level higher at BBB-, while Fitch Ratings grades the securities BB+, in line with Moody’s.

Colombia’s increased oil output may allay concerns that its economy, South America’s fourth-largest, is growing slower than its peers. The government may use oil revenue to pay down debt and aims to cut central government debt to less than 30 percent of gross domestic product by 2020, from around 40 percent, Moody’s said.

“Proposed legislation aimed at addressing some of Colombia’s structural fiscal issues has improved the prospects for further debt reduction in coming years,” Moody’s analyst Alessandro Alecci said in a statement on the company’s newswire.

Moody’s reduced Colombia’s foreign debt rating to junk in 1999. Increasing the rating would give Colombia a similar debt grade to Brazil’s.

Today’s announcement doesn’t apply to Colombia’s local- currency debt, which it grades one level higher at Baa3, Moody’s said.

The Colombian peso rose as much as 0.4 percent after the announcement, before retreating to little changed for the day at 1,804.32 per U.S. dollar, from 1,804.9 yesterday. The average yield spread on Colombian dollar bonds over U.S. Treasuries dropped 13 basis points, or 0.13 percentage point, to 177, according to JPMorgan Chase & Co.’s EMBI+ index.

To contact the reporter on this story: Sebastian Boyd in Santiago at sboyd9@bloomberg.net

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