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Tougher times ahead

Uribe: Colombia's president has had a lot to shout about, with an approval rating well above 60%, but he is struggling to contain a growing fiscal deficit as he positions himself for the 2006 election

War-torn Colombia has enjoyed a good run in the past two years and given bondholders a lot to cheer about. But now investors are asking if popular president Alvaro Uribe will be able to keep the outlook bright in 2005. Last year Colombian spreads narrowed a sizeable 90 basis points to about 340bp over US treasuries, generating more than 10% in total returns, several notches above the market as a whole. Uribe's success in pushing the country's Marxist guerrillas into retreat after four decades of internal conflict has cut kidnapping and terrorist attacks, boosted business confidence and helped attract investment. Those gains have translated into economic growth of almost 4% in 2003, the highest rate in nearly a decade, and paved the way for a repeat

performance in 2004.

But if Uribe, who has an approval rating well above 60%, has a lot to shout about, exacting times are surely ahead.