Paraguay charts local bonds
April 12, 2017 |
The sovereign hopes to round out its 2017 fundraising needs with $58m in seven-year notes in guaranies
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.
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]
If the amendment becomes
law, the next presidential election could see Cartes face off
against former President Fernando Lugo, who maintains strong support in