Colombia targets GDN as sovereign pares back TES issuance
Colombia is gearing up to issue its first global depository note to draw international investors into its local debt market, as it advances plans to curtail issuance of peso-denominated Treasury (TES) bonds next year by at least 2 trillion pesos.
Michel Janna, Colombia's head of public credit and national
treasury, told LatinFinance in an interview that the
sovereign could issue a GDN as soon as next year, pending an
appropriate structure for dealing with the country's 14%
"There are a couple of banks with the idea of launching GDNs
for Colombia. We encourage this: if it's done in the proper
way, there will be an advantage for the local market. It
simplifies the procedure for investors to tap the local
market," he said.
The sovereign will consider issuing hard currency debt in
the new year, though timing will depend on two events: an
increase in US Treasury yields "by up to 50 basis points in the
next two to three quarters" and Colombia's presidential
elections in May, Janna said.
Further diversification of Colombia's funding currencies is
desirable, but not imminent, he said. "It's a possibility that
we could go for euro or yen transactions at some point, but not
in the immediate future," Janna said.
The government is establishing a centralized treasury, where
public entities with high cash balances - including the
airports agency, the oil agency and the telecoms fund - will be
required to deposit their excess cash, instead of in TES, as
has been the norm.
"We will be managing that money and putting it in accounts
in the central bank," Janna said.
The result will be a decline in TES issuance by public
entities of at least 2 trillion pesos in 2014 and 6 trillion
pesos thereafter. The scheme, which will be fully implemented
by 2015, will not impact the TES primary market, however.
The government is seeking to reduce its total debt stock to
30.5 trillion pesos in 2013 and a further reduction of "2
trillion pesos or maybe more next year".
"This should have a positive fiscal outcome," Janna
In 2011 Colombia introduced a fiscal rule to reduce the
structural central government deficit to 1% of GDP by 2022,
from 2.4% in 2012. Since the rule's implementation, the
government has met all its fiscal targets.
"The fiscal rule already forced us to have lower deficits
and therefore lower debt," Janna said, noting that ratings
agencies had reacted favorably to the plan to reduce total debt
stock further through lower TES issuance.
The central government deficit, long at the heart of
Colombia's fiscal problems, averaged 3.6% of GDP between 2001
The country's debt to GDP ratio stands at 33%, a sum Janna
expect to reach 20% "at some point in the next decade".