Colombian companies are in a strong position to resist a potential change in economic policy if the left-wing senator Gustavo Petro is elected president and apply your proposed changes to the oil industry, to agriculture, a wealth tax and repeal of laws that make the labor market more flexible, said the corporate analysis unit of Fitch Ratings.
Mind you, Petro’s plan to stop oil exploration”would negatively affect the credit quality of Ecopetrol, Frontera Energy, Energía Gran Tierra, and SierraCol Energy“according to analysts Joe Bormann, Natalia O’Byrne Cuellar, and Martha Rocha.
(See: This was the first face-to-face of Ingrid Betancourt, Petro and ‘Fico’).
Analysts also consider that the Petro’s ideas may face a difficult path to be approved, since Colombia relies heavily on oil and gas for tax revenue and foreign direct investment, and political parties that lean to the center-right and right make up about 64% of the Senate and 55% of the House of Representatives.
Businesses could bear possible higher taxes and more regulation, they added.
(See: Markets, with slight reaction to election results).
“A degree of cash flow pressure from these policies would probably not lead to many downgrades.credit, since many companies took advantage of the low interest rates in 2020-2021 to extend debt maturities.
“Short-term debt concentration is low at 6% of total debt, while operating cash flow should be able to cover interest expense by almost 6 times“, they maintained.
85% of supervised companies with international ratings have a stable rating outlook, while 10% are negative and 5% positive.
(See: Peñalosa and Robledo: the decline of the Enriques?).
The political landscape has changed compared to the 2018 elections with a more fragmented Congress and a weakened right wing in the presidency with low approval ratings for the president Ivan Duke and without a clear leader.
“Given the fragmentation of political positions, a less polarized centrist candidate could emerge who brings together different political wings to defeat Gustavo Petro in the second round.“, they concluded.
(See: Petro’s coup authority in this Sunday’s voting).
Colombia carries out first round of presidential elections on May 29 with a potential second round three weeks later.
BLOOMBERG
