Colombia’s peso bucked a rally in Latin American currencies on Wednesday after Standard & Poor’s said it could downgrade the country’s “BBB” rating.
S&P revised its outlook for Colombia’s rating to negative from stable on Tuesday as slumping oil prices weigh on trade and economic growth. If the agency follows through with a downgrade, it would leave the country one step away from losing its coveted investment grade.
Analyst Mario Castro at Nomura Securities said in a client note he expects Colombia to be downgraded “sooner rather than later.”
Political difficulties amidst peace negotiations with FARC risk are delaying fiscal reform, adding to pressure stemming from cheaper oil, he said.
The Colombian peso and the Mexican peso had dropped to all-time lows last week, pressured by a recent tumble in oil prices to 12-year lows. Both countries depend heavily on crude exports as well as oil-related tax revenue.