facebook
linkedin
twitter
About Us
  • BFSI
  • Energy
  • Infocom
  • Mining
  • Venture
  • Industry
  • Travel
  • Civic
  • Food, Health, Ag
  • Real Estate
  • Responsibility
  • Economy
  • Law & Justice
  • Interview
  • Analysis

Analyst: Colombia & Brasíl’s Local Governments Pressured By Low Commodity Prices

Posted On January 13, 2016
By : Loren Moss
Comment: Off
Tag: antioquia, arauca, bogotá, brasil, brazil, casanare, colombia, fitch, fitch ratings, meta, putumayo, sao paulo

Local and regional governments (LRGs) in Brazil and Colombia should face similar challenges from the decline in commodities prices and their importance to their economies, according to Fitch Ratings. LRGs in Colombia and Brazil suffer from high numbers of informal workers (those partially or fully outside of the reach of government regulation and taxation) and budgetary planning that often does not adequately prepare for external and structural shocks.

Fitch says it expects declining commodity pressure to mainly affect the small- and mid-sized state and local governments in both countries. Antioquia and the capital Bogota Distrito Capital, Colombia’s largest states, and Sao Paulo, Brazil’s most populous state, are fairly dynamic and diversified economies with strong service sectors. The decline in oil-related activities will primarily affect the second largest Brazilian state of Rio de Janeiro and several smaller states in Colombia, including Meta, Casanare, Arauca and Putumayo.

LRG expenditures in Brazil are rigid and do not offer financial flexibility. A relevant portion of their revenues must be directed to education, healthcare and law enforcement, irrespective of local needs. LRGs in Colombia depend more on national transfers, especially for education and healthcare.

During 2015, Brazil’s Real and Colombia’s Peso devalued by approximately one third versus the U.S. dollar. The Colombian and Brazilian central banks increased interest rates to limit inflationary pressures and better anchor inflation expectations. Fitch estimates that Brazil’s economy will contract by at least 2.5% in 2016 (after a 3.7% contraction in 2015). Growth prospects for Colombia should slow to 2.6% in 2016 from 2.8% expansion in 2015.

The ongoing recession in Brazil and moderated growth in Colombia will negatively impact tax revenues in both countries. However, Colombian LRGs are not exposed to foreign currency debt, which will limit their financial burden to further currency depreciation. And Brazilian LRGs are less exposed to the construction economic cycle, which is likely to slow down in 2016, with negative impact on Colombia’s economy.

Several states have already adopted contingency procedures such as canceling commercial contracts, freezing investments and reducing headcount. Once restricted to the fourth largest state of Rio Grande do Sul, the states of Rio de Janeiro, Tocantins and Sergipe are expected to also delay payments to their employees in early 2016. In Fitch’s opinion, these states will have to look for additional measures to balance their budgets.

 

The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article, which may include hyperlinks to companies and current ratings, can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.

DON'T MISS OUT: The only English-language Colombia news that's strictly business, markets, & investment!
Join global executives & investors by subscribing to our FREE weekly updates
I agree to have my personal information transferred to MailChimp ( more information ) DISCLAIMER: Protección de Datos Personales Artículo 15 de la Constitución Política de Colombia, ley 1581 de 2012 y decreto 1377 de 2013.
We will never spam you or share your email address ¡Nunca Jamás!

Share the news!

  • Facebook
  • Twitter
  • Print
  • Email
  • WhatsApp
  • LinkedIn
  • Skype

Related

Share your thoughts:

comments

About the Author
Loren Moss is the founder and publisher of Finance Colombia. He has over 20 years of international business experience, including over a decade of experience in securities, insurance, and commercial real estate, at the institutional and international level.
  • google-share
Previous Story

Level 3 Communications Opens New Data Center In Cali

Next Story

Colombia’s Stake In Isagen Sold To Brookfield Renewable Energy For $2 Billion USD

Related Posts

0

US President Joe Biden Speaks with Colombia President-Elect Gustavo Petro

Posted On June 22, 2022
, By Loren Moss
Today, Colombian voters elected Gustavo Petro as the next president of Colombia, along with his running mate Francia ‘Márquez Mina as vice president
0

Gustavo Petro Elected Colombia’s Next President

Posted On June 19, 2022
, By Loren Moss
0

Finance Colombia Video News Recap: What Will Happen In Tomorrow’s Presidential Elections?

Posted On June 18, 2022
, By Loren Moss




Search

RECENT

POPULAR

COMMENTS

US President Joe Biden Speaks with Colombia President-Elect Gustavo Petro

Posted On June 22, 2022

Guest Editorial: Colombia’s Establishment Wins Again, But at What Price?

Posted On June 20, 2022
Today, Colombian voters elected Gustavo Petro as the next president of Colombia, along with his running mate Francia ‘Márquez Mina as vice president

Gustavo Petro Elected Colombia’s Next President

Posted On June 19, 2022

Finance Colombia Video News Recap: What Will Happen In Tomorrow's Presidential Elections?

Posted On June 18, 2022
Viva Buenos Aires

Viva Launches New Routes Connecting Colombia & Argentina

Posted On June 16, 2022

Romanian Cybercriminal Mihai Ionut Paunescu Captured In Colombia

Posted On June 29, 2021
Photo montage courtesy EPM

EPM’s Board of Directors Resign En Masse, Creating Crisis For Mayor Daniel Quintero

Posted On August 17, 2020
Reason Foundation's Daniel Raisbeck

The Reason Foundation's Daniel Raisbeck On What Peru's Election Can Tell Us About Economic Liberty In Colombia & Latin America

Posted On June 13, 2021

Deadly Riots & Protests Against Police Brutality Break Out Across Colombia

Posted On September 10, 2020

AVIANCA IS BANKRUPT

Posted On May 10, 2020

[…] The Reason Foundation’s Daniel...

Posted On June 20, 2022

[…] The Reason Foundation’s Daniel...

Posted On June 20, 2022

[…] Finance Colombia: Colombia and...

Posted On June 19, 2022

[…] Finance Colombia: Colombia and...

Posted On June 19, 2022

[…] Colombia, CARICOM Countries...

Posted On June 15, 2022

Watch This!

Consider Advertising With Us

Click here to visit Expat Group's English site

Subscribe Free

don't forget to include "http://"
* = required field
Your Background / Function








unsubscribe from list

RECENT

POPULAR

COMMENTS

US President Joe Biden Speaks with Colombia President-Elect Gustavo Petro

Posted On June 22, 2022

Guest Editorial: Colombia’s Establishment Wins Again, But at What Price?

Posted On June 20, 2022
Today, Colombian voters elected Gustavo Petro as the next president of Colombia, along with his running mate Francia ‘Márquez Mina as vice president

Gustavo Petro Elected Colombia’s Next President

Posted On June 19, 2022

Romanian Cybercriminal Mihai Ionut Paunescu Captured In Colombia

Posted On June 29, 2021
Photo montage courtesy EPM

EPM’s Board of Directors Resign En Masse, Creating Crisis For Mayor Daniel Quintero

Posted On August 17, 2020

Deadly Riots & Protests Against Police Brutality Break Out Across Colombia

Posted On September 10, 2020

[…] The Reason Foundation’s Daniel...

Posted On June 20, 2022

[…] The Reason Foundation’s Daniel...

Posted On June 20, 2022

[…] Finance Colombia: Colombia and...

Posted On June 19, 2022

Watch This!

Contact Us (Click the image):

Pages

  • About Us
  • Colombia Events, Conferences, Festivals and Important Dates
  • Contact Us
  • main
  • Media Partnerships
  • Privacy Policy
  • Search Results
  • Whatsapp test page
Copyright 2014-2020 Finance Colombia All Rights Reserved. We may earn commissions from qualifying purchases.
Posting....
WhatsApp us