( BW)(NY-FITCH-RATINGS/COLOMBIA) Fitch Affirms Colombia's 'BB' Rating & Negative Outlook

BW5699 MAY 14,2003 12:07 PACIFIC 15:07 EASTERN     Business Editors

    NEW YORK & LONDON--(<a href=www.businesswire.com>BUSINESS WIRE)--May 14, 2003--Fitch Ratings has today affirmed the Republic of Colombia's long-term foreign and local currency ratings of 'BB' and 'BBB-', respectively. The Rating Outlook remains Negative. The short-term foreign currency rating is 'B'.     Colombia's sovereign credit fundamentals have been deteriorating since the recession of 1997/1998, yet the strong leadership and ambitious agenda of President Alvaro Uribe, who took office in August 2002, have helped to stem further weakness. The president successfully advanced several key fiscal, labor, and pension reforms which helped to improve public finances and domestic confidence. Even though several of the fiscal adjustments have begun to dampen household purchasing power through new taxes and public sector wage freezes, and although unemployment remains high, the president has generally sustained his initial popularity and is now pushing for a constitutional referendum for spending freezes and political reform. The outcome of the referendum, and the government's ability to deliver stronger sustained economic growth and improved security will be key factors in determining whether Colombia has truly reached the nadir of its credit deterioration and is repositioned for a rebound, or whether its mounting vulnerabilities will outweigh the considerable progress from the first five months of the president's term.     The risks to a scenario for government debt stabilization are considerable. Even under the government's base case scenario, debt would continue to rise in 2003, and remain stable in 2004 before declining in 2005. Lower than expected growth and higher than expected spending could impact fiscal outturns, however, as they have in recent years. Declining projections for U.S. and world growth could weigh on expectations for Colombia in the months to come. The new course of the Colombian internal conflict also raises new uncertainties about domestic confidence this year and next. The dramatic contraction of the economy in Venezuela, Colombia's second trading partner after the U.S., is another source of potential pressure on exports and investment levels. Finally, should the referendum fail, confidence in the fiscal position of the government could weaken, dampening the current mood of cautious optimism. In light of these uncertainties, many of which will be resolved over the course of the year, Fitch affirmed its Negative Outlook.

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CONTACT: Fitch Ratings, New York
         Morgan C. Harting, 212/908-0820 (CFA)  
         Roger M. Scher, 212/908-0240
         Matt Burkhard, 212/908-0540 (Media Relations)

KEYWORD: NEW YORK
INDUSTRY KEYWORD: BANKING BOND/STOCK RATINGS
SOURCE: Fitch Ratings