Paraguay targets investment grade rating after 30-year bond

Paraguay targets investment grade rating after 30-year bond

Paraguay will strive to achieve investment grade status following the sale of a 30-year $1bn bond that was a “vote of confidence” from investors, the country’s deputy finance minister Daniel Correa has told LatinFinance.

The landlocked South American country met strong demand when it priced the deal on Monday, prompting it to shed plans for a 10-year tranche and instead focus on the longer maturity.

“This was a vote of confidence that the market has given to Paraguay ... We achieved one of the objectives the government had: to issue a 30-year bond,” Correa said soon after the deal priced.

   Paraguay presidential palace - Marco Bogarin  
“Market conditions are really good for emerging countries like Paraguay that have been implementing coherent political economies for a while, which has helped us improve our ratings,” he added.

The Paraguayan government would continue implementing “sound” economic policies in a bid to reach investment grade status, Correa said. Paraguay is rated Ba2/BB/BB-.

“This helps us to send a message to the international arena that Paraguay is a country where investments can be safe, effective and profitable. We think this is just the beginning, we’ll continue going to the international markets. Now we need to further improve our economic policies and increase investments so that Paraguay can reach investment grade status,” he said.

The country aims to implement an investor-friendly legal framework to boost foreign direct investment, and to revamp infrastructure to diversify the economy from agricultural exports.

“We are using this financial investment in order to bridge and attract all kinds of investment,” central bank governor Carlos Fernández said in a special report on Paraguay in the July/August edition of LatinFinance, regarding the country’s plan to return to the international bond market. "That is investment in factories, in land, in real estate. That is the way we are using the sovereign bonds."

The bulk of the capital raised with the 30-year bond is earmarked for infrastructure investment, Correa said. “Now we have to work with the different ministries so that these investments start in a rapid, effective and transparent way.

“This will foster economic growth and an increase in state spending and we think that the private sector will also be part of the process, doing the kind of investments that Paraguay needs,” Correa said. LF

See also

Paraguay goes long in $1bn deal – 5 August

Paraguay: An agenda for reform – special report

Paraguay upgraded – 12 June