It has weathered the mother of all economic shocks, turned the tide in Latin America’s oldest insurgency and now, Colombia has regained a coveted investment-grade rating.

Standard & Poor’s decision to rate the country’s long-term and short-term foreign-currency sovereign credit at BBB- and A3 respectively puts it in good company in the region.

Brazil, Mexico, Chile and Peru are all investment-grade economies, and the last two are Colombia’s partners in the forthcoming bourse integration, Mila, that will create Latin America’s second biggest market by market capitalisation after Brazil.

“Colombia is now an investment-grade country. That sends a signal to the world and also makes it very clear to anyone who has restrictions on their investment choices,” Joydeep Mukherji, S&P analyst, told the FT.

Colombia lost its investment rating in September 1999 amid a banking crisis and escalating violence in the war with the Revolutionary Armed Forces of Colombia.

S&P raised its rating to BB+ back in 2007 and gave it a tantalising positive outlook, but global downturn from the financial crisis delayed the decision.

“The world economic crisis was a very powerful stress test, and Colombia came through that better than most people expected,” Mr Mukherji says.

He expects Colombia’s debt burden will stabilise as its economy and fiscal revenues grow.

Colombia was also subjected to a different kind of stress test – the diplomatic dispute with neighbouring Venezuela that sparked a damaging Venezuelan ban on Colombian imports.

But Colombians and investors may be pleased to hear that the Venezuela dispute had no direct bearing on the ratings decision and that a similar dispute in the future would not jeopardise the rating.

“Colombia is not a one-horse town, it’s a diversified economy by Latin American standards; trade patterns are changing. It increased manufactured exports to other countries to compensate for the loss of Venezuela trade.”

Moody’s Investors Service and Fitch Ratings rate Colombia one level below investment grade.

Source: http://blogs.ft.com/beyond-brics/2011/03/17/colombias-latest-triumph-investment-grade-rating/