Latest news with #NelsonBocanegra
Yahoo
30-04-2025
- Business
- Yahoo
Explainer-Why did the IMF block Colombia's access to a credit line?
By Rodrigo Campos, Nelson Bocanegra NEW YORK/BOGOTA (Reuters) -The International Monetary Fund said on Saturday it had set conditions for Colombia's access to its $8.1-billion Flexible Credit Line, a precautionary tool for crisis prevention and mitigation, effectively cutting access for the country from that cash. Colombia had access to a similar tool since 2009, but only made use of it once in 2020 when the pandemic wreaked havoc on the global economy. But the IMF move shines a fresh light on the country's fiscal issues, which have been troubling financial markets for months. Analysts said the implication of losing the FCL access was a rise in borrowing costs, which was already seen in an April 15 Eurobond offering. WHAT IS AN FCL? The FCL is a fund program that requires the applicant country to have strong economic fundamentals and institutions, and a willingness to keep both. It can last for one or two years and has no preconditions once triggered. To qualify for continued access to the program, a government needs a "very positive assessment of the country's policies" in a yearly visit by the IMF to check on policy and economic direction - internally called an Article IV Consultation, according to the fund's website. Countries should also follow criteria that include a track record of capital market access at favorable terms, have low and stable inflation, and data transparency. WHAT IS COLOMBIA'S FCL? The IMF approved Colombia's current FCL in April 2024. The South American country has had access to that type of program since 2009, tapping it once in 2020 with a then $5.4-billion draw to cover budget needs during the pandemic. Colombia's current $8.1-billion FCL was approved to replace the 2022 one. Bogota said it would treat the arrangement as "precautionary," meaning it does not expect to draw unless there is an unforeseen situation. WHY WAS COLOMBIA'S ACCESS CONDITIONAL? The two-year arrangement requires an Article IV visit that results in a report followed by a midterm review to make sure access to the facility remains uninterrupted. However, Colombia did not finalize an Article IV report with the fund. In visits to Bogota in mid-February and early April, engagement has been "close," according to the IMF. Between those visits, German Avila was sworn in as new finance minister. His predecessor resigned after three months amid clashes over budget cuts, and hours after a labor reform championed by President Gustavo Petro was rejected by lawmakers. "Engagement continues as the authorities work on plans to reduce the fiscal deficit this year and going forward," an April 18 IMF staff statement said, adding the government was working on the policies underpinning projected revenue gains and necessary spending adjustments to meet the overall fiscal deficit target. The government announced this year it would cut its 2025 budget by 12 trillion pesos ($2.85 billion) to 511 trillion pesos, but an independent office said this month an additional adjustment of some 46 trillion pesos ($11 billion) is needed to meet the fiscal rule. While the government said it had complied with the fiscal rule last year citing technicalities, analysts and experts said that was not the case. WHAT NEXT? The IMF and Colombia remain engaged in Article IV consultations but until those are completed, there will not be an FCL midterm review. It is unclear whether Colombia's fragile fiscal situation would allow it to pass the review. Colombia's spreads to comparable U.S. debt have widened some 100 basis points to nearly 400 bps over the past 12 months, sharply underperforming regional peers Chile and Peru. Its $3.8-billion offering this month yielded a 7.5% coupon on the five-year debt and 8.75% for 10-year, both considered high. Colombia's midterm fiscal framework, a roadmap for the country's indebtedness for this year and next, must be published by the government by mid-June.
Yahoo
11-04-2025
- Business
- Yahoo
Lower oil prices could sink Ecopetrol's full-year profits by $2.8 billion, president warns
By Nelson Bocanegra BOGOTA (Reuters) - Lower oil prices could reduce Colombian state-run oil firm Ecopetrol's profits by up to 12 trillion pesos ($2.76 billion) this year, the company's president warned on Friday. Ecopetrol may also have to scrap production at some fields and focus on those with lower costs, president Ricardo Roa told journalists on the sidelines of an industry event. Crude oil prices were headed for their second-consecutive weekly loss on Friday, with Brent futures at $63.45 a barrel, on concerns of an intensifying trade war between the United States and China. "We already have a first list of fields that have a break-even point close to that price, so we'll have to eliminate them and focus on those with lower costs," Roa said. Roa added that around 20 to 30 fields could be at risk of closure. Ecopetrol operates 158 fields, although the executive cautioned that the fields on the chopping block were not major producers. It was unclear how much of a production hit their closure could represent. "As the price of oil drops, the company will need to monitor that number and make decisions regarding eventual closures of other fields that might not be profitable," Roa said. Beyond the hit to production, the lower crude prices translate into a huge hit for Ecopetrol's profits, he added. Each dollar difference on the international market means a 900-billion-peso hit to EBITDA (earnings before interest, taxes, depreciation and amortization) and a 700-billion-peso hit to net profit, Roa added. "If we were considering (oil prices at) $73 a barrel and now they're at $63, then we have a difference of 12 trillion pesos in price." Ecopetrol's profits are key to Colombia's economy, which is facing increasing fiscal pressure as tax revenues slip, forcing the government to boost its debt and cut spending. NATURAL GAS BOOST Separately on Friday, Ecopetrol announced it would launch two new natural gas sale processes this year. Starting in June, the state-run firm will sell additional natural gas produced locally, while in July it will start sales on gas imported through the Buenaventura port. Natural gas from an offshore block jointly operated with Brazilian state-run producer Petrobras should come on the market at the end of this year, with the potential to meet around 14% of Colombia's current demand for the energy source.
