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Fitch downgrades Colombia's long-term local currency issuer default rating

Fitch Ratings on July 22 downgraded Colombia's long-termlocal currency issuer default rating to BBB from BBB+, with a negative outlook.

Fitch also revised its outlook to negative from stable andaffirmed Colombia's long-term foreign currency issuer default rating at BBB.The agency also affirmed the short-term foreign currency issuer default ratingat F2 and assigned a short-term local currency issuer default rating of F2.

Fitch believes Colombia does not have strong public financefundamentals relative to external finance fundamentals or preferred treatmentof local currency creditors relative to foreign currency creditors. Therefore,the country's credit profile no longer supports a notching up of the long-termlocal currency rating above the long-term foreign currency rating.

The outlook revision reflects that Colombia's currentaccount deficit reached 6.4% of GDP in 2015, which makes the country morevulnerable to changes in investor sentiment and external financing conditions.The deficit should narrow to 5.8% in 2016 and gradually decline in 2017 and2018, Fitch forecast. The agency also expects external debt to remain high overthe forecast period.

Fitch added that the country's ratings balance its "flexibleand credible" policy framework, improved external buffers, and record ofmacroeconomic and financial stability against high dependence on commodities,limited fiscal flexibility and structural constraints in terms of low GDP percapita and weak governance indicators.