Colombia dawdles in its response to oil crisis

Investors worry that if the Colombian government doesn’t hurry to implement its proposed tax reform, the credit rating agencies could downgrade Colombian debt. Such a move would raise the country’s cost of financing its debt and further worsen its financial situation.

Reuters explained that the Colombian government raised investors’ fears when it announced earlier this week that the tax reform would not be submitted to the Colombian Congress in the first half of the year, as originally planned. The report speculated that the delay is due to the Colombian government’s desire to ratify the expected peace agreement with the FARC before trying to pass an unpopular tax reform.

In oil-related news, Juan Carlos Echeverry, president of Colombian state-owned oil company Ecopetrol, spoke with the press about the possibility that Ecopetrol might not distribute dividends this year. He explained that the Colombian government – the oil company’s largest shareholder - in recognition of Ecopetrol’s financial distress, had told the oil company that it was not expecting any profit this year.

Lastly, Colombian President Juan Manuel Santos earlier this week demanded an explanation and called for a full inquiry into the $4 billion in cost overruns for Ecopetrol’s Reficar oil refinery project in Cartagena. President Santos said, “After seeing these figures, Colombians are shocked. Cost overruns of this magnitude have no justification whatsoever.” The article noted that President Santos went on to blame the administration of Álvaro Uribe, his predecessor.