The Big Idea
Colombia | Parallels to Panama
This material is a Marketing Communication and does not constitute Independent Investment Research.
After the recent elections in Colombia, the country seems to be very focused on lowering its cost of funding and maximizing budget flexibility to help it manage a structurally high fiscal deficit. Colombia may also have some lessons to learn from the financing diversification strategy of Panama. But after significant spread tightening ahead of the elections, my preference remains for high carry alternatives that avoid longer Eurobond tenors.
The gains in Colombia’s sovereigns after elections were understandably limited after the market had already priced in a political transition. Comparison with other ‘BB’ Latin American sovereigns suggests some incremental gains on shorter tenors relative to Brazil or maybe even some gains on longer tenors relative to the Dominican Republic. But the market now may have a higher sensitivity to supply and demand for Colombia and the country’s overall funding strategy. There has been much focus on the credit intracurve relative valuation after ambitious debt liability management operations last year.
The election results would suggest it is now back to basics on Colombia’s financing strategy with a priority to minimize the cost of funding. There has been some confusion about debt renegotiation following a recent interview from candidate De la Espriella last weekt. The main takeaway from the interview is the priority for cash flow relief. Presumably this raises the importance of getting the best economic terms for new issuance and of diversifying from high-cost local funding. This invites comparisons to Panama and its effective financing strategy since last year.
Panama emphasized a strategy that avoided Eurobond markets and opted instead for short tenor bank loans, EUR-denominated funding and local market treasury bills. The funding program for 2025 shifted to more than 50% bank loans that also included multilateral guarantees this year for much longer 10-year funding. The absence of net Eurobond issuance for over two years achieved the primary objective of much lower cost of funding but also the secondary objective of a ‘halo’ effect of comparative investment grade valuations. This could then allow Panama to reenter Eurobond markets with a better balance between supply and demand after waiting until Moody’s affirms an investment grade rating later this year.
Colombia could similarly explore broader loan capacity either through banks or multilaterals for better funding. However, it would seem illogical to avoid Eurobond markets after the impressive flattening of the 10s30s curve. The 30-year debt offers similar funding at much longer maturity. The aggressive buyback of the longer tenors has allowed for a supply deficit of longer bonds with tranches of less than $1 billion from 2051-2061. This would then compensate for any short-term bank loans to maintain the average maturity profile of the debt. The capacity for 2- to 3-year loans also somewhat constrained considering the heavy Eurobond maturities 2029-2031.
The Eurobond markets should still remain relevant for a country with large gross funding needs and a high structural fiscal deficit, especially considering the higher relative cost of local funding. The early estimates from the MTFP assumes $6.7 billion in external financing for next year—$2.6 billion in Eurobonds, $1.5 billion in bank loans and $2.6 billion from multilaterals and bilaterals.
My preference remains for the shorter tenors on the Eurobond curve, which look like buyback candidates, or alternatively higher yielding options like quasi-sovereigns or EUR-denominated bonds. The initial reaction to the election results reaffirms a mature stage of spread compression with some profit taking. This s higher carry should add to the appeal of alternatives with the EUR-denominated bonds the highest yielding options across ‘BB’ credits (swapped into US dollars) and the lowest supply risk after the saturation of EUR debt issuance last year.
This material is intended only for institutional investors and does not carry all of the independence and disclosure standards of retail debt research reports. In the preparation of this material, the author may have consulted or otherwise discussed the matters referenced herein with one or more of SCM’s trading desks, any of which may have accumulated or otherwise taken a position, long or short, in any of the financial instruments discussed in or related to this material. Further, SCM may act as a market maker or principal dealer and may have proprietary interests that differ or conflict with the recipient hereof, in connection with any financial instrument discussed in or related to this material.
This message, including any attachments or links contained herein, is subject to important disclaimers, conditions, and disclosures regarding Electronic Communications, which you can find at https://portfolio-strategy.apsec.com/sancap-disclaimers-and-disclosures.
Important Disclaimers
Copyright © 2026 Santander US Capital Markets LLC and its affiliates (“SCM”). All rights reserved. SCM is a member of FINRA and SIPC. This material is intended for limited distribution to institutions only and is not publicly available. Any unauthorized use or disclosure is prohibited.
In making this material available, SCM (i) is not providing any advice to the recipient, including, without limitation, any advice as to investment, legal, accounting, tax and financial matters, (ii) is not acting as an advisor or fiduciary in respect of the recipient, (iii) is not making any predictions or projections and (iv) intends that any recipient to which SCM has provided this material is an “institutional investor” (as defined under applicable law and regulation, including FINRA Rule 4512 and that this material will not be disseminated, in whole or part, to any third party by the recipient.
The author of this material is an economist, desk strategist or trader. In the preparation of this material, the author may have consulted or otherwise discussed the matters referenced herein with one or more of SCM’s trading desks, any of which may have accumulated or otherwise taken a position, long or short, in any of the financial instruments discussed in or related to this material. Further, SCM or any of its affiliates may act as a market maker or principal dealer and may have proprietary interests that differ or conflict with the recipient hereof, in connection with any financial instrument discussed in or related to this material.
This material (i) has been prepared for information purposes only and does not constitute a solicitation or an offer to buy or sell any securities, related investments or other financial instruments, (ii) is neither research, a “research report” as commonly understood under the securities laws and regulations promulgated thereunder nor the product of a research department, (iii) or parts thereof may have been obtained from various sources, the reliability of which has not been verified and cannot be guaranteed by SCM, (iv) should not be reproduced or disclosed to any other person, without SCM’s prior consent and (v) is not intended for distribution in any jurisdiction in which its distribution would be prohibited.
In connection with this material, SCM (i) makes no representation or warranties as to the appropriateness or reliance for use in any transaction or as to the permissibility or legality of any financial instrument in any jurisdiction, (ii) believes the information in this material to be reliable, has not independently verified such information and makes no representation, express or implied, with regard to the accuracy or completeness of such information, (iii) accepts no responsibility or liability as to any reliance placed, or investment decision made, on the basis of such information by the recipient and (iv) does not undertake, and disclaims any duty to undertake, to update or to revise the information contained in this material.
Unless otherwise stated, the views, opinions, forecasts, valuations, or estimates contained in this material are those solely of the author, as of the date of publication of this material, and are subject to change without notice. The recipient of this material should make an independent evaluation of this information and make such other investigations as the recipient considers necessary (including obtaining independent financial advice), before transacting in any financial market or instrument discussed in or related to this material.
Important disclaimers for clients in the EU and UK
This publication has been prepared by Trading Desk Strategists within the Sales and Trading functions of Santander US Capital Markets LLC (“SanCap”), the US registered broker-dealer of Santander Corporate & Investment Banking. This communication is distributed in the EEA by Banco Santander S.A., a credit institution registered in Spain and authorised and regulated by the Bank of Spain and the CNMV. Any EEA recipient of this communication that would like to affect any transaction in any security or issuer discussed herein should do so with Banco Santander S.A. or any of its affiliates (together “Santander”). This communication has been distributed in the UK by Banco Santander, S.A.’s London branch, authorised by the Bank of Spain and subject to regulatory oversight on certain matters by the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA).
The publication is intended for exclusive use for Professional Clients and Eligible Counterparties as defined by MiFID II and is not intended for use by retail customers or for any persons or entities in any jurisdictions or country where such distribution or use would be contrary to local law or regulation.
This material is not a product of Santander´s Research Team and does not constitute independent investment research. This is a marketing communication and may contain ¨investment recommendations¨ as defined by the Market Abuse Regulation 596/2014 ("MAR"). This publication has not been prepared in accordance with legal requirements designed to promote the independence of research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. The author, date and time of the production of this publication are as indicated herein.
This publication does not constitute investment advice and may not be relied upon to form an investment decision, nor should it be construed as any offer to sell or issue or invitation to purchase, acquire or subscribe for any instruments referred herein. The publication has been prepared in good faith and based on information Santander considers reliable as of the date of publication, but Santander does not guarantee or represent, express or implied, that such information is accurate or complete. All estimates, forecasts and opinions are current as at the date of this publication and are subject to change without notice. Unless otherwise indicated, Santander does not intend to update this publication. The views and commentary in this publication may not be objective or independent of the interests of the Trading and Sales functions of Santander, who may be active participants in the markets, investments or strategies referred to herein and/or may receive compensation from investment banking and non-investment banking services from entities mentioned herein. Santander may trade as principal, make a market or hold positions in instruments (or related derivatives) and/or hold financial interest in entities discussed herein. Santander may provide market commentary or trading strategies to other clients or engage in transactions which may differ from views expressed herein. Santander may have acted upon the contents of this publication prior to you having received it.
This publication is intended for the exclusive use of the recipient and must not be reproduced, redistributed or transmitted, in whole or in part, without Santander’s consent. The recipient agrees to keep confidential at all times information contained herein.
