In Colombia’s local fixed-income market, the Títulos de Tesorería (TES) fixed-rate curve appreciated across its entire structure over the last month. As of March, the total balance of TES in circulation stood at 747.9 trillion COP. Despite this positive market valuation, macroeconomic headwinds remain a central concern for the Ministerio de Hacienda y Crédito Público. The fiscal balance of the Gobierno Nacional Central (GNC) reported an accumulated deficit of 1.7% of GDP through February.

These persistent fiscal imbalances were cited as the primary driver behind the recent decision by S&P Global (NYSE: SPGI) to downgrade Colombia’s sovereign credit rating. The administration continues to manage these debt instruments against a backdrop of tight monetary conditions, which remain a primary focus for institutional investors holding Colombian sovereign paper.

Colombian fixed-income markets show valuation gains despite a recent S&P credit downgrade linked to ongoing fiscal imbalances.

The international fixed-income landscape experienced notable shifts between March 25 and April 23, 2026. The yield curve for US Treasury bonds displayed mixed performance, defined by a decrease in short-term rates and an increase in long-term yields. Analysts attribute this volatility primarily to conflicting signals regarding the ongoing conflict in the Middle East.

Economic indicators released by the Bureau of Labor Statistics show that annual consumer inflation, measured by the Consumer Price Index (CPI), accelerated by 0.9 percentage points to reach 3.3% in March. This data triggered a rebound in short-term inflation expectations within the Treasury bond market, while medium and long-term outlooks remained stable. Consequently, the Intercontinental Exchange (NYSE: ICE) MOVE index—which tracks public debt market volatility—and the Cboe (NYSE: CBOE) VIX—which monitors S&P 500 equity volatility—both registered significant declines during the period.

On April 8, 2026, S&P Global Ratings (NYSE: SPGI) lowered its long-term foreign currency sovereign credit rating on Colombia to BB- from BB and its long-term local currency rating to BB from BB+. The outlook for both ratings is stable, reflecting expectations that the Government of Colombia will gradually reduce its fiscal deficit while sustaining moderate growth in the national gross domestic product.

The rating action follows persistent fiscal imbalances and a policy environment that has become less predictable since the pandemic-related recession. The government decision to suspend the national fiscal rule in 2025 marked a significant shift in the policy framework. Pro-cyclical fiscal policies have provided marginal support for employment and consumption, but have also contributed to higher inflation expectations and a wider current account deficit. S&P expects the general government fiscal deficit to reach 5.6% of the national gross domestic product in 2026, compared to 5.3% in 2025.

“We expect Colombia to have consistently large fiscal deficits over the next few years.” — S&P Global Ratings

Institutional stability remains a key factor in the rating, though challenges persist. A fragmented legislature followed the March 2026 elections, where Pacto Histórico and Centro Democrático emerged with the largest minorities. The upcoming presidential election, scheduled for May 31, 2026, adds further uncertainty. Candidates such as Iván Cepeda of Pacto Histórico, Paloma Valencia, and Abelardo de la Espriella have proposed varying approaches to fiscal consolidation. The new administration will inherit spending pressures related to domestic security, rising healthcare costs, and pension payments linked to minimum wage increases.

The Banco de la República, the independent central bank of the country, has maintained a tight monetary policy to combat inflationary pressures. Annual inflation reached 5.3% in February 2026, prompting the bank to increase reference rates to 11.25%. S&P anticipates that inflation will not return to the target range of 3% +/- 1% until early 2029. While the independent status of the central bank provides a buffer against external shocks, high interest rates and lower-than-expected revenue collections have contributed to the widening deficit since 2024.

Economic growth is projected at 2.5% for 2026, slightly below the 2.6% recorded in 2025. Per capita growth is estimated at $9,900 USD for 2026, with real growth expected to average just above 2% through 2029. Despite being a net energy exporter, the performance of the US economy and international energy prices continue to influence national outcomes. Hydrocarbon exports declined to 35% of goods exports in 2025, down from 67% in 2013, showing some diversification even as the sector remains a primary source of volatility.

Net general government debt is forecast to approach 66% of the national gross domestic product by 2029, rising from 60.4% in 2025. S&P notes that the government interest burden will average 12.3% of general government revenue over the next three years. The shift toward issuing shorter-term debt instruments has reduced reported interest payments but increased vulnerability to interest rate fluctuations. External indicators remain a concern, with narrow net external debt expected to stabilize at 130% of current account receipts through 2029. Foreign direct investment is expected to be the primary source for funding the current account deficit, which is projected to stabilize around 2.6% of the national gross domestic product.

Vise photo credit © Loren Moss

The ratings agency highlighted the Ecopetrol’s strategic relevance for Colombia and the benefits of being an integrated business which has allowed the petroleum driller and refiner to capture opportunities along the value chain, despite the impacts of the COVID-19 pandemic. Furthermore, the rating agency referenced Ecopetrol’s solid financial position in the oil and gas industry with proven access to capital markets. 

S&P also highlighted the company’s efforts to establish decarbonization goals and considers that ISA acquisition represents a substantial progress regarding the group’s energy transition allowing diversification towards a regulated and predictable business such as transmission.

Ecopetrol is the largest company in Colombia and one of the main integrated oil and gas conglomerates in Latin America with more than 13,000 employees. It accounts for more than 60% of the hydrocarbon production in Colombia, and it owns the largest refineries and most of the country’s oil-pipelines and multi-purpose pipelines network. It also participates in the commercialization of energy and in the distribution of gas.

At the international level, Ecopetrol focuses on strategic basins on the American continents, with E&P operations in the United States (the Permian basin and the Gulf of Mexico), Brazil and Mexico. 

Above photo: Ecopetrol Huila colloidal dispersion gels injection plant (CDG) in its Dina Cretaceous field

As the video is in English, it appears not directed at Colombians, but at influencing his image in the eyes of foreigners. Under 3 years of Duque’s presidency, Colombia has experienced multiple cases of police abuse, record levels of cocaine production, a rash of massacres, and a rise in targeted killings of social and political activists.

Many political analysts are already accusing right-wing Duque of handing Colombia over to left-wing politicians based on his ineptitude, failure to execute, and tone-deafness. Duque’s prosecutor has already filed dubious charges against Colombia’s possible centrist candidate, Sergio Fajardo, in what appears to be an attempt to politically crippling the former Mayor of Medellin, leaving a right-wing candidate, possibly from Duque’s own party, and far-left former revolutionary Gustavo Petro.

“US Audiences know what this feels like, they know what it IS like,” said Sergio Guzman, co-founder of consulting firm Colombia Risk Analysis. “After George Floyd & Black Lives Matter, and using the military to clear Lafayette Park, American audiences connect with Colombian protesters much, much more!”

Colombian Anger With President Duque’s Administration Boils Over Into National Protests & Violent Confrontations With Riot Police

While Colombians initially protested Duque’s tax reform package that sought to expand income tax collection to those making well under $1,000 per month, the deadly reaction of Colombia’s riot police ignited emotions and invited many who might support a tax package to turn against the government’s violent response, and broader issues such as their failed vaccine rollout, ineptitude in the face of rising crime, and clear failure to sell policies to the public, or implement those it has initiated.

Now Colombia has lost its investment grade foreign currency rating, and the world has become largely appalled at the Duque Administrations response. His presidential legacy in tatters, Duque now seeks to convince the external world that “It’s not my fault, my opponents don’t like me!”  But Duque has to answer for the past three years and the legacy he has created. The police violence and cases of abuse, the historic record cocaine production, the failed implementation of the peace process, the lack of availability of COVID vaccines, the failure to protect social leaders.

Nobody Likes Ivan: Understanding The Nationwide Protests & Unrest In Colombia

The downgrade of the sovereign follows the withdrawal of a fiscal reform introduced to Colombia’s congress in a context of high spending pressures, which has resulted in a significantly lower likelihood of Colombia improving its fiscal position following a recent and marked deterioration. Given the country’s high external vulnerability and moderate economic profile (balanced by adequate institutions and monetary credibility), Colombia’s debt, stabilizing at about 60% of GDP during 2021-2024, and relatively large fiscal deficits are no longer consistent with an investment-grade (‘BBB-‘ or higher) foreign currency rating.

The downgrade of the two government-owned development banks reflects their very important economic roles and links to the government. Similarly, the ratings on the sovereign cap those on Banco Davivienda, given the commercial bank’s large exposure to country risk and the highly sensitive nature of its businesses to sovereign stress. Finally, S&P says the rating actions do not reflect a deterioration in the entities’ stand-alone credit profiles (SACPs).

See Also: S&P Lowers Colombian Currency Rating to Junk: BB+

Finance Minister (Alberto) Carrasquilla is no longer the Finance Minister and has been replaced by the Minister of Commerce Jose Manuel Restrepo, who appears to be ‘on message’ immediately saying that will be no extra taxes that affect the middle and lower classes – that effectively takes out VAT increase and an expansion of the tax base.

That is not going to do the trick, especially in the case of the tax base: This is the third time such a proposal has been withdrawn because of political motivations, but it is a move that eventually has to be made, a country can’t sustain itself with so few paying taxes at source. The problem is that in this instance the additional VAT charges were going to make such a change overtly painful, especially for the middle-income group. This tax base component should be moving ahead – within the OECD Colombia has about the biggest headline corporate tax rate and about the lowest contribution from individuals; that isn’t sustainable. Once again, we are heading for a ‘Band Aid’ solution as opposed to the structural change that the Colombian tax code requires.

Rupert’s opinions & analysis as an independent expert contributor are his own and not necessarily those of Finance Colombia or the BVC.

Again, setting aside the fact that most of those protesting have several other complaints beyond the tax reform, much of the problem has been optics and messaging. The issue now is that having stirred up a hornet’s nest, the government will need to find a solution using the traditional source of most taxes: corporations and the wealthy. There won’t be a lot of sympathy for the second group, nor for the first in reality, but the companies already pay their fair share and further burdening them won’t help the recovery. This time around it may not be headline rates but the removal of subsidies, however it adds up, to the same in the end.

The social uprising (is that too melodramatic?) is being handled with 10 days of meetings involving most everybody in the country. To that end the protesters, the vast majority of whom have been peaceful, have gotten their way. The key is that they are not just listened to, but that action is taken. One of the complaints of those currently on the street is that during the protests of 2019 the same ‘dialogues’ were held, promises made…and nothing happened.

Against the backdrop of the images we have seen, it appears almost churlish to discuss Colombia’s investment grade credit rating, however its removal would have more effect on those protesting than most of them could imagine. For that reason, it is vital—beyond vital—to get a tax reform penned and passed ASAP. The country economically is in a financial hole and cannot afford more lost working days, infrastructure damage or a further loss of confidence.

COVID has ravaged the country, vaccination levels are near the back of the pack, even in LatAm, and people are understandably frustrated by the situation, but the country has to move forward, and the tax reform needs to be re-submitted in an acceptable form in order for that to be achieved. The longer the debate goes on, the further the damage will be. The new cross-bench group who will look at proposals needs to complete their work without delay; ideally something simple so as to avoid lengthy debate. Middle- and low-Income groups need to be made comfortable, frankly whatever it takes to bring some calm, if only because coming down the road are other reforms including the health sector…and there have been plenty of banners to be seen objecting to that process.

Recent macro data has been solid with retail sales and industrial production beating expectations, Confidence levels inching up, and unemployment, while too high, coming down steadily. But all this could be derailed if the government doesn’t work speedily. Both foreigners reading the press and locals looking out of the windows will be equally reluctant to invest if the current situation continues. Inflation edged up in April to 1.95%, no reason to panic but roadblocks over any period of time will only push it higher as goods fail to reach the market.

Finance Minister Restrepo has publicly stated that there is no reason for Colombia to lose its investment grade and that he will be fighting to make that the case. That needs to represent 99% of his priority list right now.

In the markets the COLCAP took a leg down on Monday, as did the Peso. We also have seen benchmark 2024 bonds move from 4.35% to a high of 4.89% since the end of last week. All of these have created trading opportunities with all three products having stabilized and have now recovered some of the losses, but the strength of that recovery will now be proportional to improvement in the situation.

These are going to be long days in Colombia but as ever it is darkest before the dawn.

________________________________________

That is about it for today. Remember these are just themes that jump out at me. Please refer to your local analyst, economist, salesperson or soothsayer for more details.

My regards to all,

Roops

Above image provided by Rupert Stebbings

The rating downgrades of Ecopetrol, OCENSA and A.I. Candelaria reflect the direct and indirect linkage of these companies to the Sovereign Rating downgrade of Colombia, which Fitch downgraded to ‘BBB-‘ from ‘BBB’. The ratings for Emgesa, Isagen and UNE EPM Telecomunicaciones have been affirmed at ‘BBB’ reflecting the country ceiling for Colombia of ‘BBB’. The negative outlooks on the foreign currency ratings reflect the fact that they could be negatively impacted by downgrades of the country’s Sovereign Rating and country ceiling.

These companies operate within Colombia and do not have substantial offshore cash or EBITDA from other countries. The ratings on Grupo de Inversiones Suramericana (Grupo Sura) (‘BBB’/Stable) reflect their offshore cash and EBITDA outside of Colombia. The applicable country ceiling for Grupo Sura is that of Chile, since cash flow from Chile is sufficient to cover interest expenses for both companies. Grupo Energia Bogota’s (GEB’s) (‘BBB’/Stable) applicable country ceiling is that of Peru, since cash flow from Peru is adequate to cover GEB’s interest expense. The ratings of Transportadora de Gas Internacional (TGI) (‘BBB’/Stable) reflect its strong linkage with its parent company, GEB. A further downgrade of Colombia’s Sovereign Rating will likely result in rating downgrades for Ecopetrol, OCENSA, A.I. Candelaria, Emgesa, Isagen and UNE EPM Telecomunicaciones.

RATING ACTIONS

• UNE EPM Telecomunicaciones S.A. LT IDR BBB Affirmed BBB
  • LC LT IDR BBB Affirmed BBB
• Ecopetrol S.A. LT IDR BBB- Downgrade BBB
  • LC LT IDR BBB- Downgrade BBB senior unsecured
  • LT BBB- Downgrade BBB
• Grupo de Inversiones Suramericana S.A. LT IDR BBB Affirmed BBB
  • LC LT IDR BBB Affirmed BBB
• Oleoducto Central S.A. (OCENSA) LT IDR BBB- Downgrade BBB
  • LC LT IDR BBB- Downgrade BBB
• Isagen S.A. ESP LT IDR BBB Affirmed BBB
  • LC LT IDR BBB Affirmed BBB
• Grupo Energia Bogota S.A. E.S.P. (GEB) LT IDR BBB Affirmed BBB
  • LC LT IDR BBB Affirmed BBB
• I. Candelaria (Spain), S.L. LT IDR BB+ Downgrade BBB-
  • LC LT IDR BB+ Downgrade BBB-  senior secured
    LT BB+ Downgrade BBB-
• Emgesa S.A. E.S.P LT IDR BBB Affirmed BBB
  • LC LT IDR BBB Affirmed BBB senior unsecured
  • LT BBB Affirmed BBB
• Transportadora de Gas Internacional S.A. ESP (TGI) LT IDR BBB Affirmed BBB
  • LC LT IDR BBB Affirmed BBB senior unsecured
  • LT BBB Affirmed BBB

KEY RATING DRIVERS
The sovereign downgrade reflects a likely weakening of key fiscal metrics in the wake of the economic downturn caused by a combination of shocks stemming from the sharp fall in oil prices and efforts to combat the worldwide coronavirus pandemic. Fitch expects a moderate contraction of the Colombian economy by 0.5% in 2020, driven by a significant slowdown in domestic demand and oil exports, followed by a modest recovery of 2.3% in 2021.

A rise in the debt burden in recent years and an expected fall in tax revenues have left the government with less fiscal space to counteract economic shocks, in Fitch’s view. The Negative Outlook reflects downside risks to the outlook for economic growth and public finances, and to the capacity and quality of the government’s policy response to decisively cut deficits and stabilize debt over the coming years, given the scale of the shocks.

Developments that May, Individually or Collectively, Lead to a Positive Rating Action:

Fitch does not currently anticipate developments with a high likelihood of leading to a positive rating change. However, the main factors that could lead Fitch to stabilize the Outlook include:

• Fiscal consolidation consistent with an improved trajectory for public debt dynamics.
• A return to economic growth prospects consistent with medium term potential above 3%.
• Reduced external imbalances that improve external debt and liquidity ratios.

Developments that May, Individually or Collectively, Lead to a Negative Rating Action:

• Failure to achieve a fiscal consolidation consistent with stabilization and eventual reduction in the government debt burden.
• Damage to medium term growth prospects.
• Sustained large external imbalances that lead to a continuous rise in the external debt burden.

• The global spread of the COVID-19 Coronavirus Pandemic has significantly reduced demand for air travel in recent weeks. S&P stated that it expects Avianca Holdings S.A.’s (Avianca) operating results to materially deviate from prior assumptions.
• The airline has taken immediate measures to manage the impact of reduced demand for global air transport. However, S&P believes that these measures will be insufficient to offset the impact on the company’s credit metrics, tightening its already stressed liquidity. Thus, they believe Avianca faces higher refinancing risk.
• On March 20, 2020, S&P Global Ratings lowered its issuer credit rating on Colombia-based airline operator Avianca to ‘CCC’ from ‘B-‘. They are also lowered their rating on its senior secured notes to ‘CCC’ from ‘B-‘ and on its senior unsecured to ‘CCC-‘ from ‘CCC+’.
• At the same time, S&P lowered its issuer credit rating on LifeMiles LTD and their issue-level rating on the company’s senior secured term loan to ‘B-‘ from ‘B+’. The outlook is stable.
• S&P placed ratings for Avianca on CreditWatch with negative implications, reflecting that a prolonged travel disruption could further deteriorate the company’s liquidity.

Excerpts from a statement issued by Standard & Poor:

Reduced travel demand and capacity will affect Avianca’s credits metrics. The Colombian government recently announced that it will close the Colombian international airspace to passenger travel effective March 23, 2020. Therefore, Avianca will cease international passenger capacity for the next 30 days (which represented 50% of the company’s revenues as of Dec. 31, 2019), and will reduce domestic capacity by 84%. Although the company has immediately implemented additional cost savings, we do not believe these measures will be adequate to offset the impact of already deteriorated liquidity and credit metrics. As a result, we downgraded the company. We now expect the company’s debt to EBITDA to remain well above 5x, funds from operations (FFO) to debt below 6%, and pressured EBITDA margins below 15%.

Avianca owns 70% of LifeMiles, and Advent International (not rated) owns the remaining 30%. The downgrade of LifeMiles reflects that of its parent company, Avianca, but we limit it to ‘B-‘ given that LifeMiles is an insulated subsidiary with a separate governance structure, and we don’t expect Avianca would intervene in LifeMiles’ operations. As a result, the outlook is stable, and the rating on LifeMiles wouldn’t be affected if we take a further rating action on its parent.

LifeMiles, Ltd. is a coalition loyalty, program and the sole operator of Avianca Airline’s frequent flyer program. LifeMiles has commercial partnerships that allow its members to accrue and redeem miles for different products and services such as airline tickets, hotels, and rental cars among others. For example, LifeMiles can be earned or redeemed at major Colombian retailers like Totto or hotel chain Estelar. LifeMiles is 70% owned by Avianca Holdings, S.A. and 30% owned by Advent International, that stake being taken in Avianca under previous management 4 years ago. LifeMiles reported gross billings of $352 million over the twelve months ended March 31, 2019.

Issuer: LifeMiles Ltd.

• • • Corporate Family Rating, Downgraded to B2 from Ba2

    • Senior Secured Bank Credit Facility, Downgraded to B2 from Ba2

    • Outlook, Changed To Negative From Stable

Ratings Rationale:

LifeMiles’ downgrade to B2 reflects its exposure to the weak credit profile and liquidity pressures of Avianca Holdings, S.A. (Avianca) which increases the risk of additional up streaming of cash flows to shareholders, either in the form of dividends, most likely financed with incremental debt, or anticipated purchases of airline tickets. LifeMiles’ B2 rating also incorporates its good liquidity and solid business model being the sole operator of Avianca’s frequent flyer program, its diversified and sticky base of commercial partners and co-brand credit card growth. Also reflected in the rating are the potential benefits to the company’s growth plan from improved economic dynamics in its largest markets.

The rating of the term loan takes into consideration its secured position within the capital structure of the company. The corporate family rating is at the same level of the senior secured rating given that it is the only debt in the company’s capital structure.

On July 22, Avianca announced it has temporarily deferred payments on some long-term leases and on principal payments on certain loans. On the same date, Avianca announced that it will commence as soon as possible an exchange offer for all of its $550 million senior notes due in May 2020.

LifeMiles has a strong business model that includes unrelated commercial partners and co-branded credit cards, but its single largest contributor to gross billings is Avianca, who together with its air partners, represent around 30% of gross billings. As such, if Avianca were to face operating problems this would hamper LifeMiles’ operation as customers’ interest in purchasing, adding or converting LifeMiles miles into Avianca’s air tickets would decline. Moreover, Avianca’s liquidity pressures may affect LifeMiles’ credit profile in the form of debt-financed dividend payments which will ultimately result in higher leverage. For example, in August 2017 LifeMiles obtained a $300 million amortizing term loan used to pay dividends, and in 2018 and 2019 the company up-sized its outstanding term loan by a total of $195 million which also up streamed to its shareholders. Still, the rated term loan has a mandatory prepayment clause that obliges the use of a percentage of excess cash to pay down the term loan. This clause partly offset the risk of cash leakage at LifeMiles before fulfilling its debt payment obligations. Furthermore, LifeMiles´ solid corporate governance framework, and particularly Advent International´s strong minority shareholder rights, also mitigate the risk of a potential cash leakage before payment of debt obligations. In addition, LifeMiles liquidity policy of maintaining a minimum cash balance equivalent to six months of rewards plus two quarters of debt service also mitigates this risk.

Moody’s estimates that, absent additional indebtedness, LifeMiles’ leverage (adj. debt/EBITDA) would gradually decline from 3.3 times as of March 31, 2019 to below 3.0 times by year-end 2020. Nonetheless, we believe LifeMiles could increase its indebtedness to finance dividend payments over the next few quarters.

LifeMiles has good liquidity. The company generates strong cash flow from operations and has limited capital spending requirements. It has minimum cash requirements to cover six months of rewards plus two quarters of debt service. In addition, LifeMiles benefits from a five-year $20 million committed revolving credit facility, which is currently undrawn.

LifeMiles’ largest contributors to gross billings are its financial partners (50%) and Avianca and air partners (30%), being Avianca its largest customer, responsible for approximately 26% of gross billings. Around 80% of accrued miles are redeemed, with 92% being redeemed into air tickets. The 8% balance is redeemed into non-ticket rewards. LifeMiles benefit from Avianca’s leading market position in Colombia and Central America.

LifeMiles has around nine million members, more than 100 agreements with financial institutions including co-branded credit cards and miles conversion agreements, and more than 700,000 active co-branded credit cards. The number of members has grown steadily at a 9.3% CAGR in the last five years.

LifeMiles’ largest market is Colombia where it generates 42% of its gross billings. It also sells miles in Peru, Costa Rica, El Salvador, Honduras, Guatemala, and the US; being the US the only contributor of more than 10% to gross billings. Moody’s forecasts the Colombian economy will grow by 3.3% in 2019 and 3.5% in 2020. Similarly, Moody’s estimates that, in Colombia, private consumption will grow at a 4% CAGR and retail sales will grow at a CAGR of 4.6% in 2019-2023.

The negative outlook reflects Moody’s view that the company’s credit quality may be negatively impacted by Avianca’s weak financial profile and that LifeMiles will be required to increase its dividend payout.

An upgrade would require an improvement in Avianca’s credit profile and maintaining ring-fencing provisions that limit cash upstream to shareholders, as well as the maintenance of adequate liquidity and profitability. Quantitatively, an upgrade would require LifeMiles to maintain its adjusted debt/EBITDA lower than 4.0 times on a sustained basis.

The ratings could be downgraded if the company’s profitability or credit metrics worsen, with adjusted debt/EBITDA remaining above 5.0 times. A deterioration in the company’s liquidity or profitability, or a change in the company’s financial policy leading to excessive cash distribution to shareholders can lead to a downgrade. Also, any further weakening on Avianca’s credit profile or repetitive amendments to the loan agreement such that the mandatory prepayment provisions are waived or canceled, and excess cash flow is not used to pay down debt could result in a downgrade.

The principal methodology used in these ratings was Business and Consumer Service Industry published in October 2016 and viewable on the Moody’s Rating Methodologies page.