Grupo Energía Bogotá (BVC: GEB) and La Caisse, the investment arm of Caisse de dépôt et placement du Québec, have signed a final agreement to merge their respective Brazilian power transmission assets into a single 50/50 jointly controlled platform operating under the name Verene Energia S.A. The transaction was announced May 15, 2026, from Montréal and Bogotá.

The combined entity will consolidate 26 electric transmission concession agreements, more than 9,000 km of transmission lines, and a workforce of over 400 employees across 17 Brazilian states. At that scale, Verene will rank among the five largest power transmission operators in Brazil, a market that has drawn sustained interest from international infrastructure investors as the country advances grid modernization programs.

Verene, which had previously operated as La Caisse’s dedicated transmission platform in Brazil, will continue as the reference vehicle for the combined portfolio. The partners have indicated that the platform will be positioned to pursue acquisitions and network expansions in Brazil’s transmission concession market, with grid modernization and decarbonization cited as the broader policy context driving new investment opportunities.

“By bringing together highly complementary assets under one banner, the partnership establishes Verene as a scaled, business-driven platform with strong financial backing.” — Emmanuel Jaclot, Executive Vice-President and Head of Infrastructure and Sustainability, La Caisse

Grupo Energía Bogotá, headquartered in Bogotá and listed on the Bolsa de Valores de Colombia (BVC: GEB), has operated in Latin America’s energy sector for more than 130 years. The company holds assets in electricity generation, transmission, distribution, and gas transportation and distribution across Colombia, Peru, Brazil, and Guatemala. Its entry into the joint venture contributes its existing Brazilian transmission concessions to the merged platform alongside La Caisse’s Verene assets.

La Caisse manages net assets of 517 billion CAD as of December 31, 2025, on behalf of 48 depositors representing more than six million Quebecers. The fund is active across major financial markets, private equity, infrastructure, real estate, and private credit, and has built a significant infrastructure portfolio in Latin America through investments including the Verene platform.

Juan Ricardo Ortega, president of Grupo Energía Bogotá, described the rationale for the transaction in terms of combining complementary strengths. “By combining our operational expertise and regional market knowledge with the financial strength and global perspective of our partner, we are creating a platform positioned to accelerate growth, expand transmission energy infrastructure, and support Brazil’s energy transition,” he said. “We believe this alliance will generate sustainable value for our stakeholders and contribute to Brazil’s economic and energy development.”

Emmanuel Jaclot, executive vice-president and head of infrastructure and sustainability at La Caisse, framed the deal as a consolidation play. “By bringing together highly complementary assets under one banner, the partnership establishes Verene as a scaled, business-driven platform with strong financial backing,” Jaclot said. “GEB brings more than 130 years of operating heritage and ranks among Latin America’s leading energy infrastructure groups, with deep expertise across the region’s transmission sector. Together, we share a vision to strengthen Verene’s footprint in Brazil through value-creating acquisitions and continued support for the country’s energy transition.”

Financial close is expected by the fourth quarter of 2026, subject to customary closing conditions, regulatory consents, and approvals. BTG Pactual (BVMF: BPAC11) acted as financial advisor to La Caisse, with Pinheiro Neto Advogados serving as legal counsel. Citibank (NYSE: C) advised Grupo Energía Bogotá on the financial side, while Mayer Brown provided legal advice to GEB.

SierraCol Energy Andina, LLC, a wholly owned subsidiary of SierraCol Energy Limited, has initiated a cash tender offer to repurchase up to $300 million in aggregate principal amount of its outstanding 6.000% Senior Notes due 2028. The offer began on October 23, 2025, and is contingent upon the successful issuance of new senior debt securities.

SierraCol Energy, headquartered in Bogotá, Colombia, is the country’s largest independent oil and gas producer by gross operated and jointly operated production. The company was formed in 2020 by the spinoff of Occidental Petroleum’s Colombian assets. It operates across the Llanos, Middle Magdalena, and Putumayo basins.

The company has been the subject of recent divestiture discussions, with Carlyle reportedly exploring a potential $1.5 billion sale of its stake in the firm.

SierraCol is backed by The Carlyle Group (NASDAQ: CG), which holds its investment through Carlyle International Energy Partners (CIEP). CIEP manages approximately $21 billion in assets focused on the global energy sector outside North America.

As of 2024, SierraCol reported free cash flow of $172 million and net debt of $511 million. The company has been the subject of recent divestiture discussions, with Carlyle reportedly exploring a potential $1.5 billion sale of its stake in the firm.

The notes, originally issued in September 2021 with a total principal of $600 million, are listed under CUSIP numbers 82653L AA9 (Rule 144A) and U8215L AA2 (Regulation S). The tender offer is being conducted in accordance with the terms outlined in the Offer to Purchase dated October 23, 2025.

The company has set a maximum repurchase amount of $300 million, though it may adjust this figure at its discretion. Holders who submit their notes by 5:00 p.m. (New York City time) on November 5, 2025, will be eligible for an early tender payment of $50 per $1,000 principal amount. These early participants will receive a total consideration of $1,000 per $1,000 principal amount, inclusive of the early payment.

Notes tendered after the early deadline but before the expiration time of 5:00 p.m. (New York City time) on November 21, 2025, will be eligible for $950 per $1,000 principal amount. All accepted tenders will also receive accrued and unpaid interest up to, but not including, the applicable settlement date.

SierraCol may elect to settle early tenders on any date at least three business days after the early tender deadline and before the expiration time. Final settlement for all accepted tenders is expected within two business days following the expiration time.

If the offer is oversubscribed at the early tender deadline, SierraCol will prorate accepted tenders to remain within the $300 million cap. In such a case, tenders submitted after the early deadline may not be accepted. If early tenders do not reach the cap, later tenders may be accepted, also subject to proration.

The tender offer is conditional upon the receipt of sufficient proceeds from a proposed issuance of new senior debt securities. The company has not disclosed the terms or timing of the new issuance. SierraCol retains the right to amend, extend, or terminate the offer at its discretion, subject to applicable law.

Contact Information

Investors and noteholders seeking further details can contact the dealer managers:

Citigroup Global Markets Inc.
Phone: +1 (212) 723-6106 (Collect) / +1 (800) 558-3745 (Toll-Free)
Email: ny.liabilitymanagement@citi.com

Deutsche Bank Securities Inc.
Phone: +1 (212) 250-2955 (Collect) / +1 (866) 627-0391 (Toll-Free)

J.P. Morgan Securities LLC
Phone: +1 (212) 834-7279 (Collect) / +1 (866) 846-2874 (Toll-Free)

Copies of the Offer to Purchase and related documents are available from the information agent:

Global Bondholder Services Corporation (GBSC)
Address: 65 Broadway, Suite 404, New York, NY 10006
Email: contact@gbsc-usa.com
Phone: +1 (212) 430-3774 (Banks and Brokers) / +1 (855) 654-2015 (Toll-Free)

For general inquiries, SierraCol can be reached via its contact page or by phone at +57 (601) 3454155.

Headline image: Oil Pump Courtesy Kobiecanka – Pixabay

The ADRs began trading on the NYSE on July 25, 2024, under the ticker symbol “LTM.” This marks LATAM Airlines Group’s return to the NYSE after its departure in June 2020, which occurred due to a restructuring process under Chapter 11.

As part of the subscription offer, the selling shareholders have granted underwriters a 30-day option to purchase up to an additional 2.85 million ADRs at the initial public offering price. LATAM will not receive any proceeds from the sale of ADRs by the selling shareholders. The offering is expected to close on July 26, 2024, subject to customary closing conditions.

Goldman Sachs & Co. LLC, Barclays Capital Inc., and J.P. Morgan Securities LLC are acting as global coordinators and lead bookrunners for the offering. Citigroup Global Markets Inc., Santander US Capital Markets LLC, Deutsche Bank Securities Inc., BNP Paribas Securities Corp., MUFG Securities Americas Inc., Natixis Securities Americas LLC, and Larraín Vial S.A. are serving as additional bookrunners, with Morgan Stanley & Co. LLC participating as co-manager in the transaction.

The Minister of Finance, José Antonio Ocampo, spoke out in support of the decision made by the Ecopetrol Board of Directors assembly following Carlos Gustavo Cano’s departure from that position.

Ocampo emphasized that in order to enhance “Colombia’s largest corporation,” the national government, which holds more than 88% of Ecopetrol, elected new Board members with the highest levels of expertise. “I support the election of Saúl Kattan as Chairman of Ecopetrol’s Board of Directors. His professionalism ensures that the oil company moves towards a responsible transition that will allow the company’s economic growth and the country’s fiscal stability,” the Minister said in a tweet.

Confusion

What was the chronology of these odd events? Concerning Carlos Cano’s appointment, replaced not even 24 hours later, José Antonio Ocampo explained that “yesterday a decision was prematurely announced and today it was announced what had been decided in that board, and furthermore, it must be remembered that the board is chaired by someone chosen by the government of the day”. In other words, the board’s meeting was still in progress when the news on Carlos Cano was made.

The minister stated that after selecting a new board of directors for Ecopetrol on Monday, October 24, the assembly convened on Thursday, October 27 and Friday, October 28 to conduct its first meeting. Ocampo added that Cano was not held in low regard and that as his appointment had not yet been confirmed, he had not actually lost his position.

But according to Reuters, who cited two people with knowledge of the negotiations, Colombia’s President Gustavo Petro opposed the nomination of Cano, which led to its revocation. Something that Carlos Cano also denounced himself in a letter published in Semana. “I regret to inform you that when this decision of the Board was made public, President Petro raised his voice of protest and disapproval, and, through several of his immediate collaborators, ordered the members of the board who are close to him, and also those who are not, to advance in this morning’s session my dismissal as president of the board after 24 hours of my appointment as such,” said Cano’s message.

“When this action was submitted to the board, in a divided vote, the decision was reached, induced by the president to remove me from that position, without any reason other than my proven independence from the government.”

The right decision?

What motivated the board of directors – or President Petro – to change its mind so abruptly in favor of the new Chairman Saúl Kattan? According to President Petro, who worked with him while he was the mayor of Bogotá and clearly steered the appointment, Kattan has reportedly enhanced the value of businesses like Grupo Energía Bogotá and ETB (Empresa de Telecomunicaciones de Bogotá) when he managed them. “The rights of minority shareholders shall always be respected. The guideline of the president of the republic for the action of his representatives in the new board of directors is to increase the value of Ecopetrol,” commented the President on its social media.

1. Ecopetrol configura como cualquier otra empresa su junta directiva de acuerdo a la participación accionaria, la mayoría de acciones es del Estado

2. La nueva junta directiva está conformada por personas que ya han aumentado el valor de empresas como EEB y ETB.

— Gustavo Petro (@petrogustavo) October 28, 2022

By appointing a familiar face as head of the Board of Directors of Ecopetrol, could it be that Gustavo Petro, who is openly anti-oil, is trying to manipulate the decisions made in the state oil company? When the newly elected President visited the company’s facilities in Meta in August, he claimed that “clean energy,” which he considers to be “affordable” and does not harm the environment, will be the state-owned oil company’s destiny in the following decades. Petro pointed out that the country’s energy portfolio must be diversified, and renewable energy production must be increased. Only the upcoming weeks can reveal if this is Petro’s goal in appointing Saúl Kattan.

In all cases, this reverse action, according to Citigroup, “sends the wrong message and challenges the board of directors’ independence, which may justify investors risk aversion that has translated into an implied equity risk for Ecopetrol.”

New board members

A few days before after Carlos Cano’s replacement, Ecopetrol had already announced significant changes in its Board of Directors. During an extraordinary general shareholder’s meeting held on October 24, the petroleum company appointed as non-independent representatives Mónica de Greiff Lindo, the only woman nominated by President Gustavo Petro and the first female representative at the table in the company’s history, and Gonzalo Hernández Jiménez, an economist from Universidad Javeriana, with a master’s degree and doctorate in economics from the University of Massachusetts, Amherst.

Mónica de Greiff Lindo is a lawyer with a specialization in administrative law, holds a doctorate from the Universidad del Rosario, and is considered, according to Colombian media, close to Petro and his administration, which could reinforce the President’s control over the company. Gonzalo Hernández Jiménez was also appointed by Petro’s administration.

As an economist from Colombia’s Universidad de Los Andes and a financial researcher, Saúl Kattan holds expertise in business negotiations, productivity increases, and strategic planning. He has worked in both the public and private sectors.

Besides Carlos Cano and Saúl Kattan, Ecopetrol also added five new persons as independent representatives, who are Gabriel Mauricio Cabrera, director of the firm Cabrera & Bedoya, Investment Bankers, Sandra Ospina Arango, electrical engineer with a degree in mathematics and physics from Universidad del Valle, Luis Santiago Perdomo, business administrator of the Colegio de Estudios Superiores de Administración (CESA) , Esteban Piedrahíta Uribe, economist from Harvard University and rector of Universidad ICESI, and Sergio Restrepo Isaza, business administrator from Universidad EAFIT.

With the appointments of Gonzalo Hernández Jiménez, Gabriel Mauricio Cabrera, Mónica de Greiff, Saúl Kattan and Sandra Ospina, it means that a total of five affiliates to Gustavo Petro are now in the Board of Directors of Ecopetrol. This undeniably sends a message concerning the president’s strategy with the company, as part of the “Energy that Transforms” plan for 2040, focused on the development of renewable energies.

The bonds, which mature on March 15, 2029, were issued on October 3 and have a coupon of 4.5%.

The bond issuance was made to fund governmental liability management transactions and for general budgetary purposes, as characterized by the big three credit rating agency. This included roughly $312 million to purchase outstanding notes due 2019 with a 7.4% coupon.

The company’s rating for the bonds match its BBB long-term, foreign-currency issuer default rating (IDR) for the nation of Colombia, which it affirmed in May.

“The bond rating would be sensitive to any changes in Colombia’s long-term, foreign-currency IDR,” said Fitch in a statement.

Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, and J.P. Morgan Securities LLC served as joint book-running managers for the bond offering.

Citibank operations in Colombian include 500,000 customers, 47 branches, and 424 self-service access points in Colombia. The deal also includes “assumption by Banco Colpatria of Citibank’s workforce,” according to Scotiabank.

Citigroup, which has operated in Colombia for more than a century, began looking to sell its consumer business in Colombia two years ago. In October 2016, as part of strategy to exit the market throughout South America, the New York-based banking conglomerate sold its consumer business in Brazil to Itaú Unibanco for a reported $220 million USD and its consumer business in Argentina to Banco Santander Rio.

But six weeks after it completed unloading those assets, Citi announced that it had suspended its attempt to sell its consumer business in Colombia. While it called Colombia “a strategic market for Citi” at the time, popular speculation swirled that it had proven unable to find a buyer offering acceptable terms.

Apparently now, in making a deal with Scotiabank, the financial giant has received a good enough offer to fulfill its original intention to leave the consumer business, as first announced in February 2016. Financial terms were not announced.

“We’re excited about this acquisition because it will allow us to serve new customers in Colombia and it is in line with Scotiabank’s strategy to increase scale within the Colombian banking sector, as well as the other Pacific Alliance economies of Mexico, Chile, and Peru,” said Nacho Deschamps, group head of international banking and digital transformation at Scotiabank.

The agreement, which will include proportional investments from Scotiabank and Mercantil Colpatria to maintain their current stakes in Colpatria, is subject to regulatory approval. “The transaction is not financially material to Scotiabank,” said the Toronto-based bank in a statement.

The company also highlighted the benefits the deal will have for its credit card business and potential gains of adding Citibank customers to the Scotiabank’s “global wealth management network.”

The Canadian bank said that operations at Citibank locations in Colombia will continue “as usual” until regulatory approval is finalized. It added that “Banco Colpatria, Scotiabank, and Citibank will work together to ensure a smooth transition for customers and employees.”

Citigroup will retain its corporate business in Colombia, something that the bank had maintained was its plan since the bank’s original 2016 announcement that it wanted to exit the consumer market in the Andean nation.

“Citi will keep its presence in the country with all of its current corporate and investment bank product offerings — cash management, international trade, custody service, treasury, markets and investment banking – sharpening our focus on our corporate and institutional clients,” said Alvaro Jaramillo, Colombia country head and Latin America north cluster head for Citi.

(Photo credit: bruceg1001)

Called “ThankYou Points,” these Citi benefits can now be transferred one-for-one in exchange for the Bogotá-based airline’s LifeMiles, which can be redeemed throughout the Star Alliance network that Avianca belongs to.

“LifeMiles is a great currency to hold, even for those who live outside of Latin America,” said Matt Vincett, CEO of LifeMiles. He also noted that Avianca’s frequent flyer program has been named as having the “Best Redemption Ability” by Global Traveler magazine for “four successive years running.”

(Photo credit: Avianca)

In a statement, Bancolombia said that it plans to accept the tender offer of $360,912,000 USD for the 2020 notes and $321,152,000 for the 2022 notes. The tender, in cash, is subject to the same terms and conditions that were laid out in the original purchase offer made on September 25, added the bank.

Citigroup Global Markets Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, and UBS Securities LLC are the dealer managers for the tender offer. Global Bondholder Services Corporation has been appointed as the information and tender agent.

Bancolombia also released the following details about the conditions of the tender, reprinted here as written by the financial institution:

The Tender Offer was fully subscribed as of 5:00 P.M., New York City time, on October 10, 2017 (the “Early Tender Date”). Accordingly, the Offeror will not accept for purchase any Notes tendered after the Early Tender Date, and the Notes tendered at or prior to the Early Tender Date will be accepted in accordance with the Acceptance Priority Levels (as defined in the Offer to Purchase) as described in the table below, which sets forth the principal amount of each series of Notes validly tendered and not validly withdrawn as of the Early Tender Date, the principal amount of each series of Notes to be accepted for purchase by the Offeror, subject to the conditions set forth in the Offer to Purchase.

The Company has consented to the Offeror making the Tender Offer. The Company is not making the Tender Offer. It is intended that the Notes purchased on the Early Settlement Date by the Offeror in the Tender Offer will be exchanged by the Offeror with the Company for a decrease in the proceeds of certain new notes to be issued in a new offering by the Company (the “New Offering”). The pricing of the New Offering on terms satisfactory to the Company and the underwriting agreement for the New Offering not having been terminated prior to the Early Settlement Date are conditions to the Offeror’s obligation to accept for purchase and pay for tendered Notes. The pricing of the New Offering occurred on October 11, 2017. Additional conditions to the Tender Offer are described in the Offer to Purchase. The Offeror may amend, extend, terminate or withdraw the Tender Offer.

Holders that validly tendered prior to the Early Tender Date, and whose Notes are accepted for purchase, will be entitled to receive total consideration (the “Total Consideration”) of (i) U.S.$1,105.00 for each U.S.$1,000 principal amount of the 2020 Notes, and (ii) U.S.$1,072.50 for each U.S.$1,000 principal amount of the 2022 Notes, which includes, in each case, an early tender payment (the “Early Tender Payment”) of U.S.$30.00 per U.S.$1,000 principal amount of the Notes, plus accrued and unpaid interest up to, but not including the early settlement date for the Tender Offer (the “Early Settlement Date”), which is expected to be on October 13, 2017.

The Tender Offer will expire at 11:59 P.M., New York City time, on October 24, 2017, unless extended or earlier terminated. The withdrawal deadline for the Tender Offer was 5:00 P.M., New York City time, on October 10, 2017, and so has passed. Accordingly, Notes tendered (in the past or future) in the Tender Offer may no longer be withdrawn, except as required by applicable law.

Persons with questions regarding the Tender Offer should contact Citigroup Global Markets Inc. at (800) 558-3745 (toll-free) or (212) 723-6106 (collect), Merrill Lynch, Pierce, Fenner & Smith Incorporated at (888) 292-0070 (toll-free) or (980) 388-3646 (collect), or UBS Securities LLC at (888) 719-4210 (toll-free) or (203) 719-4210 (collect). In addition, holders of Notes may contact their broker, dealer, commercial bank, trust company or other nominee for assistance concerning the Tender Offer.

Holders who would like copies of the Offer to Purchase may call the information and tender agent, Global Bondholder Services Corporation at (212) 430-3774 or (866) 470-4200 (toll free) or by e-mail at contact@gbsc-usa.com.

This followed similar selloffs initiated in 2014 in Latin American markets including Peru and Costa Rica as Michael Corbat, who took over as Citigroup CEO in 2012, tried to cut costs and scale back operations.

But today’s announcement suggests that Citi may want to retain its retail banking for the long term in Colombia, a market that it first entered exactly 100 years ago in 1916.

“Citi has decided to suspend the sale process of the consumer banking and commercial banking of Citibank Colombia S.A. announced on February 19, 2016, keeping the mentioned business lines until further notice,” said the U.S.-based company in a statement. “Our operation in the country, a strategic market for Citi that already has 100 years of history, will continue normally, focused on continuing to deliver to clients excellent products and services of the financial market in the country and seeking to contribute with the progress of Colombia.”

The sale of its consumer banking business in Brazil already took place. It reached a deal on October 8 with Itaú Unibanco. The following day, it announced the sale of its consumer banking in Argentina to Banco Santander Rio.

It remains unclear whether Citigroup now believes Colombia is a better market for its consumer services going forward or it has simply been unable to find a buyer. It had always planned to retain its corporate banking segment in Colombia.

Photo Credit: Jeff Turner

Despite a huge ceremony last week to formally sign the agreement, the nation’s peopled decided not to ratify the 297-page deal yesterday at the ballot. Now, the nation has no official peace and nobody knows what the next steps will be.

Fortunately, everybody is saying the right things. President Santos immediately validated the outcome — in which his “Yes” campaign lost by a mere 57,000 votes — and FARC top commander Rodrigo Londoño, aka Timochenko, says his guerrillas have no plans to re-take up arms. The opposition political party that supported the victorious “No” vote has met this afternoon to decide how it can work with its political opponents, and potentially the FARC, to reach a new peace deal that will be tolerable to the nation.

Even with all the major actors calling for unity, what all this means for the country at large is confusing. That goes double for the economy.

For now, stability reigns. Things could quickly change if any of the primary players decide to deviate from the calm and hopeful course we have seen in the less than 24 hours since the results came in. But everything is expected to remain orderly for the near term.

There is economic fallout, however. And the following key issues remain the biggest question marks now that peace has been defeated at the poll.

Colombia’s Currency

The peso took a hit this morning — dropping as much as 2.8%. This is a currency that has moved around a lot over the past month, however. Even after tumbling in the wake of the peace vote, it remains stronger than it was a week ago at this point before OPEC agreed to cut its oil production.

There is certainly a risk that it could fall further. And that would spell worse news for a government whose debt and account deficits have been moving in the wrong direction of late.

But the peso hit a record weakness earlier this year at 3,436 pesos to the dollar. It currently sits at 2,930 to the dollar. Unless some level of unexpected chaos erupts this week, it is unlikely to experience the type of volatility we saw in February — and even that was manageable temporarily before it started to regain some strength.

Perhaps most importantly, Brent crude is up big today. It has surpassed $50 USD per barrel for the first time since mid-August — and is up from around $46 USD last Tuesday — and the Colombian has been generally moving in line with oil prices for the past two years. If the oil rally continues, the peso may care nothing for the FARC news and reverse course to start appreciating again.

Bond Outlook

The Wall Street Journal chronicled some damage to securities, specifically looking at local-currency bonds that will come due in the next decade. “The Colombian peso was down 1.8% Monday afternoon from Friday’s close,” wrote WSJ reporter Sara Schaeffer Munoz. “The country’s borrowing costs increased, with yields on local-currency bonds due in 2024 rising by 0.15 percentage point to 6.79%, after having fallen ahead of the vote.”

The local, Bogotá-based outlet La Republica also noted the the “unexpected rejection of the agreement led to a wave of bond sales and Colombian pesos.”

The Colombian 10-year government bond was unaffected, however — and in fact gained on the first day after the peace vote came in. “Colombia government bond 10Y increased 2.56% to 7.21 on Monday October 3 from 7.03 in the previous trading session,” noted Trading Economics. The 10-year bond has dropped more than 7% this year after a steady, pronounced climb throughout 2015.

More generally, there has been an elevated interest in the Colombian bond market of late. Franklin Templeton “plowed $1.6 billion USD into Colombian debt through the second quarter,” reported Bloomberg in September, to make the company the largest foreign holder of the bonds. Citigroup told investors recently that it is expecting more inflows into the market for Colombian bonds.

What effect the failure of the peace deal has on that momentum remains to be seen.

Tax Reform

Before the peace vote, the stage was set for the Santos government to finalize a tax reform plan and send it through to Congress. This was expected to happen not long after the accord was ratified, and all hope was that the needed overhaul would become reality before the end of the year.

Now, who knows what will happen? Capital Economics, a London-based analyst and research firm, believes there is reason to worry about whether the plan is still on the table in its prior form.

“One major risk is that an important tax reform proposal that had been due to be introduced to the legislature later this month now gets delayed or watered down,” said Capital Economics in an analyst note. “This would raise serious concerns about the government’s fiscal position, which has been looking increasingly strained due to lower oil prices and the weakening economy.”

The firm cautioned that Santos could now find find himself in a much weaker position to make anything happen in the country. “President Santos has staked his legacy on securing the peace deal and its rejection has seriously undermined his position,” stated Capital Economics. “The next presidential elections are not due until 2018, but it possible that Mr. Santos now finds it more difficult to govern.

Ratings Agency Expectations

Fitch Ratings, which put Colombia’s ratings on negative outlook in July, weighed in today. In short, the agency believes that the “No” vote doesn’t necessarily have to have a negative impact on the nation’s economy. But the thorny issue of tax reform remains necessary.

“Fitch’s expectation is that the government will continue to implement a consistent and credible policy response to address economic challenges in terms of high current account deficits, high — albeit declining — inflation, and the negative impact of lower oil prices on fiscal accounts,” said Erich Arispe, Fitch’s Colombia analyst.

The message of the words appears clear: Tax reform is still the priority, and the underlying fundamentals show that officials in Bogotá still must make it happen soon. If not, more negative actions could be looming — a move that would have a major effect on the international outlook of Colombia’s economy.

“Fitch’s base case is that the government will introduce and obtain congressional approval for a revenue positive tax reform by the end of 2016,” said Arispe. “It is difficult to judge the final outcome, but a net positive revenue measure and its successful implementation are important to compensate the loss of oil-derived revenues from an already-low revenue base and replace expiring taxes in 2018.”

“Post-Conflict” Funding Complications?

Adam Isacson, a Colombia expert at the Washington Office on Latin America (WOLA), is wondering how the development will affect post-conflict funding. Nations and other bodies across the world — with the United States leading the way — have pledged hundreds of millions to support programs that were expected to hit the ground running as soon as the peace deal was ratified.

The United States has been the biggest supplier of aid to Colombia since the Bill Clinton administration. This used to come from its “Plan Colombia” program to fight drug tracking and support the nation’s military. It changed the nomenclature earlier this year — to “Peace Colombia” — and presumably won’t shift course in dispersing that money now. President Barack Obama has maintained that bipartisan support exists for a plan that will continue no matter who replaces him in the White House next January.

But the logistical questions about U.S. congressional involvement do mean this isn’t 100% clear as of today. The possibility of some $130 million USD of expected funds disappearing does exist, according to Isacson.

“The White House’s proposed ‘Peace Colombia’ aid package may suffer a deep cut,” writes Isacson for WOLA. “It was approved by both houses of Congress, but the 2017 foreign assistance budget law has not yet been reconciled, and may be rewritten after the U.S. presidential elections. The lack of a peace accord to implement may cause the US$450 million appropriation for Colombia to fall back to its 2016 level of about US$320 million. Meanwhile, other international donors may similarly redirect foreign aid funds to urgent needs elsewhere in the world, such as the Syrian refugee crisis.”

Photo: Presidencia de la República.