Colombia can expect lower interest rates and a decrease in unemployment, said President Juan Manuel Santos Tuesday after rating agency Moody’s upgraded the country’s debt rating to “positive” from “stable.”
“That lends us a lower interest rate,” President Juan Manuel Santos said in a press release, referring to the upgrade. “And what does that translate to? That the interest rates here in Colombia will also fall. And what does that mean? Employment.”
The upgrade lifts Colombia’s peso-denominated bonds from a non-investment grade to Moody’s lowest investment grade, marking a sustained perception that the Andean country is growing riper for investment.
Moody’s justified its move saying that Colombia has taken strong, consistent steps toward the reduction of its fiscal deficit coupled by maintaining a sound macroeconomic policy environment.
“The central government deficit, historically the core of Colombia’s fiscal problems, which averaged 3.6% of GDP between 2001-2010, has trended lower in recent years and we expect will reach 1.7% of GDP in 2014,” said Moody’s. Moody’s added that government debt-to-GDP is expected to fall by 3% to 31.8% by next year.
World Bank’s Colombia Director Gloria Grandolini has praised Colombia’s fiscal management, saying “Colombia is a good example of a country that manages external risks and shocks.”
Colombia has become increasingly attractive to investors and fund managers during a time of global financial uncertainty. Foreign investment in the oil and mining industries has taken on an unprecedented pace since Alvaro Uribe took office in 2002.
But some sectors still feel that they are getting hurt by Colombia’s economic conditions.
Farmers in Colombia’s coffee sector announced another wave of strikes last week in response to the government’s alleged failed promise to get them the fiscal aid they feel they need and deserve. The government promised to support rising costs in the wake of falling coffee prices for its key agricultural export sector as part of a deal in March to mend industry-wide anger. But the discontent is still unresolved.
MORE: Colombia’s coffee farmers and other sectors announce new strike
Finance Minister Mauricio Cardenas told local radio that the upgrade “reflects confidence Colombia’s investments are not only high, but continue to get better. That implies less costs for the nation.”
In a country known for dramatic gaps between rich and poor, those who live on less than $10 dollars/day make up more than 60% of Colombia society. Though unemployment has fallen in recent years, their condition, like the coffee farmers, should be an important determiner of whether or not Colombia’s lauded fiscal management is a success for all or just some.
Sources
- Moody’s changes outlook on Colombia’s government bond rating to positive (Moody’s Investor Service)
- Nueva calificación de Moody’s a economía Colombiana se traducirá en más inversión y más empleo: Presidente Santos (Office of the President Press Release)
- World Bank Press Conference
- Calificación de Moody’s confirma manejo responsable de las finanzas”: MinHacienda (W Radio)
