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Paraguay charts local bonds for 2017 budget

Apr 12, 2017

Lea Gimenez, Paraguay's vice minister for economic affairs, tells LatinFinance the sovereign hopes to round out its 2017 fundraising needs with $58m in seven-year notes in guaranies

Aaron Weinman

Keywords: sovereign bonds local bonds fundraising Fernando Lugo Horacio Cartes Lea Gimenez Paraguay

Paraguay is looking to issue the equivalent of $58m in local seven-year bonds to provide a boost to the domestic capital markets and round out its fundraising requirements for the 2017 budget.

"There are a lot of resources in the market that are not being channeled into the economy," Lea Gimenez, Paraguay’s vice minister for economic affairs, told LatinFinance. "We want to use this to generate long-term lending locally.

Paraguay has $58m remaining in it capital markets fundraising plans for 2017, following a 10-year $500m bond issue in March. The cross-border sale came after a drawn-out tussle in Congress, which ended with President Horacio Cartes using a veto to keep the 2016 budget in place.

With elections looming next year, Paraguay’s Finance Ministry is facing heightened congressional scrutiny, Gimenez said. Lawmakers have proposed allocating parts of the budget to increase wages for public-sector employees and limiting the Finance Ministry's ability to issue new cross-border bonds.

"[Congress] does not want the country to collapse, but Congress wants bargaining power," Gimenez said. "It generates an uncomfortable situation for someone managing those resources."

Cartes’ veto in December last year came after the Senate lowered the amount of debt the government could issue in 2017 to $349m from $558m.

Guarani-denominated bonds will limit the government's exposure to cross-border debt and raise funds for infrastructure investments, Gimenez said.

"This government came with a strong infrastructure plan," she said. "The number one priority is to push the [infrastructure] agenda."

Since taking office in 2013, Cartes' administration has issued almost $2bn in cross-border bonds to finance transportation projects.

"When the executive needs to repay [cross-border bonds], we have to beg to issue bonds," Gimenez said. "If you have an investment plan, you cannot finalize it because the money you wanted for projects has been allocated elsewhere."

Paraguay’s capital markets recently received a boost when the IIC announced a  PYG1bn ($180m) local bond program.

Constitutional amendment

During a closed session on April 1, the Senate voted to amend the constitution to allow the sitting president to run for reelection and also allow former presidents to enter future elections. The country’s constitution had prohibited presidents from running for reelection since 1992.

The proposed amendment now requires approval by the lower chamber, but a vote has been postponed due to unrest in the capital Asuncion.

Opponents say the amendment, if approved, will weaken Paraguay’s democratic institutions, reminiscent of the days under dictatorship.

"Cartes is not trying to violate the constitution," Gimenez said. "It is perfectly fine because, to amend the constitution, the only way to do this is voting to have a referendum, where the people can then choose to amend [the constitution] or not."

If the amendment becomes law, the next presidential election could see Cartes face off against former President Fernando Lugo, who maintains strong support in Paraguay.



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