Moody’s Ratings downgraded the credit rating of Colombia’s state-owned company Ecopetrol from Ba1 to Ba2. The decision keeps the company in speculative grade and comes with a negative outlook, a sign that the deterioration could continue if current conditions do not change. The adjustment reflects an increase in the perception of risk surrounding the company and its immediate environment.
The downgrade comes amid financial strains, greater uncertainty about the role of the State, and mounting pressure on the company’s strategy. Although Ecopetrol remains a key player in the Colombian economy, Moody’s assessment focuses on factors that go beyond its operating performance.
It is worth recalling that the company’s president, Ricardo Roa, is currently on officially paid leave for vacation, which he will extend into an unpaid absence until early August, just as the current government’s term ends, in light of the judicial investigations against him for various reasons, most notably his role as manager of Gustavo Petro’s 2022 election campaign.
Likewise, the U.S. rating agency noted that “government interference is a key element of the downgrade and reflects reduced predictability and timeliness of support mechanisms.”
Moody’s downgrades Colombia’s Ecopetrol credit rating
“The downgrade to Ba2 and the change in outlook to negative reflect a weaker assessment of support from the Government of Colombia (Baa3 stable), driven by a higher risk of government interference and reduced predictability and timeliness of support mechanisms, including payments under the Fuel Price Stabilization Fund (Fepc). As a result, we revised our support assumptions to solid from high,” the agency said.
Moody’s main argument to justify this downgrade is the shift in the perception of support from the Colombian government toward Ecopetrol. The agency believes that this backing is now less clear and less predictable, in an environment where public policy decisions have an increasingly direct impact on the company.
This assessment does not imply that the State has withdrawn its support, but rather that there is greater uncertainty about how and when it might intervene if the company faces difficulties. For investors, that lack of clarity translates into higher risk.
The relationship between Ecopetrol and the Government is structural, as it is a mixed-capital company with a public majority stake. The company is one of the country’s main sources of fiscal revenue, and its performance has direct effects on public finances. However, that same closeness also creates tensions, especially when the State’s fiscal priorities do not align with the company’s financial needs.
Moody’s also warns about risks associated with Ecopetrol’s financial structure. In particular, it points to the possibility that the company may resort to short-term debt to finance investments or potential acquisitions, which could increase its vulnerability in an environment of high interest rates and more restrictive access to credit.
Although the oil company maintains liquidity levels considered adequate, the agency anticipates that this buffer could shrink if high levels of capital expenditure persist or if strategic moves requiring additional financing take place.
The balance between investment, indebtedness, and dividend payments emerges as one of the most sensitive points. In recent years, the company has faced constant pressure to transfer resources to the State, limiting its ability to strengthen its financial position.
Pending settlement of the Fepc
Regarding the situation of the Fepc, Moody’s Ratings indicated that the Government initially planned to settle in March the outstanding commitments for the first quarter of 2025, for an amount close to 1.6 trillion pesos (approximately US$450 million).
However, that plan was modified and a different scheme was adopted: a limited cash payment, equivalent to about 0.2% of the total obligation, while the bulk of the debt, around 1.56 trillion pesos (approximately US$439 million), would be covered through the issuance of Treasury securities.
As of today, and according to various Colombian media outlets citing the Economic Research group of Banco de Bogota, “as of March 31, a placement of Treasury securities (TSE) maturing in 2030 for 2.3 trillion pesos (approximately US$648 million) would have been carried out, as well as issuances of short-term securities (TCO) with maturities between January and March 2027 for 5.7 trillion pesos (approximately US$1.605 billion).
Although there is still no official confirmation, analysts believe that these resources would have been used to cover payments by the Ministry of Finance to Ecopetrol associated with the Fepc.
This strategy, which economic experts attribute to the Government’s objective of easing treasury pressures for 2027, weakens short-term cash flow visibility—according to Moody’s—although it reduces uncertainty regarding the fulfillment of the State’s obligations.
“In a scenario of persistently high oil prices, obligations related to the Fepc could increase if domestic fuel price adjustments lag behind international parity, which could further raise working capital needs and liquidity risk,” the U.S. rating agency’s report notes.
Moody’s warned that the situation could worsen if global oil prices remain high and domestic prices do not rise at the same pace.