This pressure could be alleviated if the government gains the ability to expand its tax base. Consumers’ disposable income has been also hit by higher personal income tax rates and inflation pressure caused by the sharp currency depreciation. Increasing corporate exports will not be a short term solution for the woes faced by issuers. Corporates will need time to rebuild export channels following the sharp appreciation of the U.S. dollar against the Colombian peso during 2015.

Fitch revised its previous expectations of GDP growth down to 3.0% in 2015 and 3.5% in 2016. Weakening terms of trade and low oil prices have hurt the economy. Economic growth will continue to depend upon the country’s fourth generation infrastructure projects (4G) and a dynamic construction sector.

The Rating Outlook for Colombian corporates is Stable, despite challenging economic conditions. Most corporates continue to maintain conservative credit profiles despite increasing leverage trends. Refinancing risk remains manageable due to robust liquidity position and access to diverse funding sources.

The full report ‘Colombia Corporates Low Oil Prices Lead to Rising Corporate Taxes’ is available at www.fitchratings.com.

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