S&P Global Ratings on Jan. 18 affirmed Colombia's long-term foreign and local currency sovereign credit ratings at BBB and BBB+, respectively, saying that the action balances countervailing trends in terms of the country's fiscal deficit and external balance sheet.

The rating agency also affirmed Colombia's short-term foreign and local currency ratings at A-2, while keeping its transfer and convertibility assessment unchanged at A-. The outlook on the long-term credit ratings is negative.

On the one hand, a tax package approved in December 2016 should bolster the tax base and help lower the country's fiscal deficit, a key consideration in maintaining the ratings. However, on the other hand, S&P said it has observed a worsening of the government's interest burden and of the country's external balance sheet.

"Absent an improvement in these latter two areas, we could lower our ratings on Colombia," the rating agency noted.

Although Colombia's current account deficit dropped to an estimated 4.7% of GDP in 2016 from 6.5% in the previous year, external debt net of public- and financial-sector external assets rose further to an estimated 107% of current account receipts from 78% in 2015.

According to S&P, this reflects weakness in the country's export base, which continued to decline in 2016, as well as the concomitant accumulation of external liabilities.

"The ratings on Colombia reflect its track record of sound fiscal and monetary policies that, coupled with important improvements in domestic security over the past decade, have supported increased investment, growth, and resilience of the economy to terms of trade and other external shocks," the rating agency said.

Earlier in January, Moody's said Colombia's newly signed structural tax reform will generate credit positives for the country, including additional revenue that will support fiscal targets and help stabilize debt ratios.

S&P Global Ratings and S&P Global Market Intelligence are owned by S&P Global Inc.