S&P Downgrades Colombia to BB- — Lowest Rating Since 1993

The S&P Colombia downgrade to BB- confirms the trajectory that analysts and bond markets had been pricing for over two years — but the symbolic weight of falling to a level not seen since the country first received a sovereign rating 33 years ago makes this a landmark moment for Latin America’s fourth-largest economy, La República and Bloomberg Línea reported.

S&P cited limited fiscal flexibility, a high debt burden, a weak external position, and what it called increasingly unpredictable fiscal policy — pointing specifically to the government’s decision to suspend the fiscal rule last year. The agency said higher primary spending, elevated interest rates, and tax revenue below expectations since 2024 have combined to widen the fiscal gap beyond sustainable levels. The stable outlook means a further cut is not imminent, but S&P warned it could lower the rating within 6 to 18 months if deficits exceed projections and external financing pressures persist.

The Cascade of Downgrades

This is Colombia’s second downgrade in four months. In December, Fitch cut the country from BB+ to BB, also citing persistent fiscal deficits. The S&P move takes Colombia further down — now two full notches below investment grade and one notch from the B+ category that agencies classify as “highly speculative.” As our analysis earlier this week anticipated, the April rating season was the most likely window for the cut, and the question was whether agencies would move before or after the May 31 election.

José Ignacio López, president of the economic think tank Anif, said the downgrade places Colombia alongside Turkey, Honduras, and Mongolia. Felipe Campos of Alianza Valores noted that markets had already priced the cut — Colombia has been paying dollar-denominated interest rates above Brazil’s for over two years, despite Brazil’s own recent BB- history. The real danger, Campos said, is not today’s rating but the possibility of falling further.

Central Bank Credibility on the Line

S&P’s report contained a pointed warning: it could downgrade Colombia further if the central bank’s credibility weakens. That language arrives weeks after Finance Minister Germán Ávila walked out of the Banco de la República board following a 100-basis-point rate hike to 11.25%, with President Petro endorsing the walkout and announcing the government’s indefinite withdrawal from the board. The constitutional requirement for the minister’s presence to form quorum means the standoff threatens the central bank’s ability to set rates at all — precisely the kind of institutional erosion S&P flagged.

S&P acknowledged that the central bank’s independence and inflation-targeting framework remain strengths, and that the flexible exchange rate provides a buffer against external shocks. But the report explicitly warned that these institutional anchors are being tested. Inflation expectations for year-end 2026 have risen to 6.3%, and the 3% target is not expected to be reached until 2027 at the earliest — a timeline that the Iran oil shock and the government’s record 23.7% minimum wage increase for 2026 have made even less credible.

Election Timing

The downgrade drops into an election campaign that is already defined by institutional crisis. The Papá Pitufo scandal has forced Petro’s chosen successor Iván Cepeda into damage control. Clara López withdrew from the race this week to consolidate the left. The opposition remains split between Paloma Valencia and Abelardo de la Espriella. S&P itself noted that Colombia’s democratic institutions and system of checks and balances are strengths — but that these are “counterbalanced by persistent security challenges.”

For whoever wins on May 31, the message from the rating agencies is now unambiguous: without a credible fiscal consolidation plan, the next stop is B+. A country that held investment grade and an IMF safety net just 18 months ago is running out of notches to lose.