Colombian public debt has been hit in recent months, and one of these symptoms is the increase in the rate of treasury securities (TES). The levels of these, in the case of 10-year bonds, are not only 1.5 times the rates of a year ago, but also reached their highest peak in mid-October, with the rate reaching 15, two%.
This means that Colombia is paying a much more expensive debt today. Despite the fact that in the last three weeks these rates have undergone a downward correction, with a level closer to 12%, for experts the situation is a matter of concern. However, this phenomenon has more than one explanation.
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Andrés Langebaek, director of economic research at Grupo Bolívar-Davivienda, assures that a starting point could be the fall of the tax reform presented by the then Minister of Finance, Alberto Carrasquilla in 2021, which resulted in the downgrading of the country’s credit rating by rating agencies S&P and Fitch Ratings.
“At that moment the problems begin, because since it is not investment grade, by definition, there are buyers of Colombian debt who cannot buy”, he explained.
To the perception of a riskier Colombian economy that was brewing since last year, another global phenomenon was then added: the escalation in inflation and the increase in interest rates.
“US Treasury rates are the floor for public debt interest rates in the world. If they rise, investors demand more returns,” Langebaek added. And inflation also put an additional weight, since the TES also increase their rate to recognize a real return to the holder.
On the other hand, Juan David, Ballén, director of analysis and strategy of the brokerage firm Casa de Bolsa, says that anotherThe issue of concern is the increase in the risk premium.
“As we lost the investment grade, and since the change of government several of the president’s policies have generated nervousness, this has caused the country risk premium to rise to levels that place Colombia as if it were rated, for example, worse than Brazil, which is rated BB-, while we are BB+“, said.
According to the expert, to this is added, in addition, the increase in the cost of foreign debt due to the depreciation of the peso.
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And a similar opinion is held by Mauricio Santamaría, president of Anif. “The risk rating and the cost of debt, the CDS (an indicator of credit default), show that Colombia has a BB+ or BB debt, but apart from the fact that we have been going down, we are paying the same risk as countries like Namibia, Costa Rica, Cameroon or Rwanda, which have lower qualifications”, he indicated.
Along with the presentation and approval of the tax reform, in order to safeguard the fiscal situation, The Government has taken measures regarding public debt.
Last month, October 17, the Ministry of Finance announced the decision not to issue more TES, in the remainder of 2022, which “allows for the consolidation of a less expensive public debt.” According to the portfolio, the decision was made based on “a responsible public spending policy” and good tax collection.
then they had raised $33.75 billion in TES, 90% of the expectation for this year. According to the Treasury, that sum is enough to meet the cash needs of the Nation.
(Keep reading: The reign of savings and CDTs is consolidated in the country).
According to the director of Public Credit, José Roberto Acosta, “As stated by the Autonomous Committee of the Fiscal Rule, the international market situation has made the cost of capital more expensive through higher interest rates, derived from a global anti-inflationary policy, after a wide monetary slack”.
Acosta said that the prospects for the TES auctions “will be challenging for 2023 and it will be in the Financial Plan, which will be presented soon, where the figures for financing needs will be presented, as is traditional.”
Despite this, for the market the country’s situation remains complex. According to Santamaria, The 10-year TES rate in Colombia has increased, especially in the last period. “Today the Colombian government is paying much more for its TES, for its debt, than it paid before,” he said.
And for Langebaek, these high rates “are worrying” because they end up putting pressure on all interest rates in the economy, especially the longer-term ones, which increases the costs of issuing debt, and is an additional factor. deficit pressure, because more interest is paid.
“ANDn Colombia there is a large deficit, and the country will continue to have to issue debt and we tend to borrow at the rate that is in the market, it is a reality”, concluded Ballen.
Laura Lucia Becerra Elejalde
