ECR: Which way next for Colombia?

Jeremy Weltman
Published on:

LatAm safe-haven ranking 4th
Euromoney Country Risk score 58.22
Three-year score change -1.49
Implied default probability (1-year %) 0.15
Colombia had a bumpy path in the previous decade, reflecting the costs and uncertainties of its civil conflict with leftist rebels. Yet the sovereign’s score has lately improved to 58 points and to within a hair’s breadth of Brazil, ranking 42nd on ECR’s global scoreboard.

The re-election of president Juan Manuel Santos provides a mandate to deliver peace with the Farc rebels. The sovereign’s brighter outlook rests too on a rising score for its economic outlook, which is higher than Brazil’s, as are its survey scores for monetary policy/currency stability and bank stability. A strong policymaking environment is responsible, with monetary policy enhanced by inflation-targeting and a flexible exchange rate; financial stability benefiting from improved supervision and regulation; and fiscal credibility underpinned by structural sustainability with a fiscal balance rule and tax reform containing the deficit. Admittedly Colombia is as vulnerable to negative shocks as any country and plagued by a depressingly low score for corruption.