Bank of America Warns Colombia Becoming Increasingly Risky for Investors Due to Government Policies

Bank of America (BofA) has issued a cautious outlook on Colombia’s fiscal management, advising investors to avoid Colombian assets due to escalating fiscal risks. Bloomberg is reporting that following a two-day visit to Bogotá, BofA analysts concluded that Colombia’s fiscal risks are more severe than previously assessed, potentially impacting inflation, the Colombian peso, and monetary policy.

The analysts observed that outside of the current administration of President Gustavo Petro and his acolytes, there is a consensus that the fiscal rule was breached in 2024—a first since the measure’s establishment in 2011. They noted that this situation could pressure the exchange rate and inflation, limiting the Banco de la República‘s ability to ease monetary policy, hindering Colombia’s economic activity.

BofA also highlighted that Colombia’s revenues have fallen short of projections, increasing the need for public spending cuts. However, the bank expressed skepticism that Congress would endorse such measures due to potential political repercussions.

Colombian Peso. Photo credit: Jared Wade.