Fitch Ratings Has Negative Outlook for Colombian Companies in 2017

Fitch Ratings has lowered its outlook for Colombian corporates from stable to negative for 2017, as it sees the current difficult economic environment continuing into the new year. The nation remains divided politically, with fallout from contentious issues such as the peace process and tax reform having potential downside risks.

“2017 is expected to be another challenging year for Colombian corporates, as economic growth will remain pressured,” said Jorge Yanes, director of Fitch Ratings Colombia. “The operating environment presents a multitude of issues, including difficulties around the peace agreement, tax reform, and a weak peso.”

On a sector-by-sector basis, it has a negative outlook for domestic telecommunications due to the pressure on credit profiles due to low profits and free cash flow. It is more optimistic, with a stable outlook, for the electricity and construction sectors, however.

Electric utilities, many of which rely on hydropower, were hurt by drought related to a severe El Niño weather cycle in 2016. Energy price volatility also made the climate rough for industry companies this year. The next 12 months are likely to contain fewer challenges.

Construction and building materials companies are also among those that will help counteract an economic slowdown. Fitch sees the segment as a “key growth driver over the next two years,” according to a statement.

Photo Credit: Jared Wade