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% withholding tax.
"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
"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 and 2010.
The country’s debt to GDP ratio stands at 33%,
a sum Janna expect to reach 20% "at some point in the next