October 3, 2016 / 5:26 PM / 10 months ago

UPDATE 1-Moody's says Colombia peace deal rejection is credit-negative

2 Min Read

(Adds S&P's rating decision)

By Dion Rabouin

NEW YORK, Oct 3 (Reuters) - Colombian voters' rejection of a peace deal between the government and Marxist FARC rebels is "negative" for the country's credit profile, analysts at ratings agency Moody's said on Monday.

Moody's had assigned Colombia a Baa2 credit rating with a stable outlook prior to the rejection of the plebiscite on Sunday by a razor-thin margin of less than half a percentage point.

The agency said the result will likely "undermine the government's ability to pass other reforms."

Earlier, rival credit ratings agency Fitch said the vote would not impact its Colombia rating. Fitch has assigned the country a BBB rating and negative outlook.

Ratings analysts at Standard & Poor's said they would not make any immediate change to their current rating for Colombia, but added that the referendum result combined with the current economic slowdown could complicate the government's fiscal adjustment strategy, seen as key to boosting the nation's credit rating.

S&P has given Colombia a BBB rating with a negative outlook.

A note from JPMorgan on Monday suggested market participants could already be pricing in the possibility of a future ratings downgrade for Colombia.

"We and the market had anticipated that a 'yes' win would give (Colombian President Juan Manuel) Santos a necessary boost in order to pursue an unpopular tax reform by year end; the prospects for the reform now look uncertain at best, and may also depend on Uribista support," the note said, referring to supporters of Colombia's former president, Alvaro Uribe.

Uribe, who leads the main opposition party, had campaigned for a "no" vote in Sunday's referendum, arguing that the deal the government signed with the Revolutionary Armed Forces of Colombia was flawed.

"It will be prudent to see how the dust settles, but the market will likely price in the risk of a downgrade to Colombia's BBB rating." (Reporting by Dion Rabouin; Editing by Paul Simao)

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