Fitch Ratings Affirms Colombia at 'BB'.

NEW YORK -- Fitch Ratings, the international rating agency, has affirmed Colombia's ratings as follows:

-- Long-term foreign currency 'BB';

-- Country ceiling 'BB';

-- Local currency 'BBB-';

-- Short-term 'B'.

The Rating Outlook is Stable.

'Economic performance has continued on an improving trend over the past two years and near-term prospects appear generally sound, although external and election-related risks are significant,' said Morgan C. Harting, Fitch Senior Director and sovereign analyst for Colombia.

Growth has been supported by a favorable external environment and by improvements in local business sentiment based in part on perceptions of advances in the war against insurgent groups. Currency appreciation has helped reduce general government debt to 51% of GDP at end-2004. After narrowing to 2.7% 2004 from 3.9% of GDP in 2003 on higher tax revenues and local government budget under-execution, the general government deficit is expected to revert back to 3.9% of GDP this year because of higher local government spending and deterioration in the social security balance. Fitch expects the social security reform legislation currently before Congress to be approved by June, but this would not have an impact on cash imbalances before 2010.

According to Harting, 'It is clear that some portion of Colombia's recent economic improvement is the result of transitory positive shocks that will not be sustained over the medium term. Higher oil prices, low international interest rates and strong external demand have helped improve economic performance, and we expect these conditions to revert toward normal levels.'

Beyond the expectation of a somewhat less favorable external environment going forward, there are also risks that local and foreign sentiment may cool somewhat as the 2006 presidential and legislative elections approach and uncertainty about whether President Uribe may run for re-election continues. The somewhat larger fiscal deficit target for this year may have to be loosened further if political and external risks prove to have been underestimated. Structural fiscal imbalances related to the social security deficit, declining oil production and rising transfers to local governments will make it difficult to reduce shortfalls below current levels absent significant fiscal reform. This appears unlikely before the elections and cannot be assured afterward, either.

The Stable Outlook reflects the expectation that growth and fiscal performance will be broadly sustained over the next two years, supporting general stability in government debt and gradual reductions in external debt. Creditworthiness could improve on: substantial reductions in structural fiscal imbalances; continued growth in investment to support higher potential output; and sustained, strong export performance. The credit could come under pressure, on the other hand, if fiscal performance should deteriorate beyond current expectations and if Colombia reverts back to a prolonged slow-growth path. Significant deterioration in monetary and exchange rate stability could also increase credit risk.