Chile to issue more green bonds in 2020

Chile to issue more green bonds in 2020

Bonds Debt Capital Markets Corporate & Sovereign Strategy Andean Economy & Policy

Chile is planning to issue around $3.3 billion in green bonds next year, building on the landmark transactions earlier this year when it became the first sovereign issuer from Latin America to sell green bonds. 

The Andean country broke new ground in mid-June, when it issued $1.42 billion in green bonds in the dollar market. A week later, Chile turned to the European bond market and raised €861 million ($959 million) as the first sovereign issuer from outside the eurozone to sell green bonds in euros.

Andrés Pérez, the head of international finance at Chile's Finance Ministry, told LatinFinance that the country will look to tap the bond market during the first quarter next year. "We are in the process of finalizing the documentation," he said.

Chile will likely divide its upcoming green bond sales evenly between dollars and euros, Pérez said. The ministry has hired bookrunners to arrange the sale of green bonds in both currencies, but Pérez declined to identify them. 

Earlier this month, the government announced a $5.5 billion stimulus package and unveiled plans to issue more debt in external markets after the economy contracted following weeks of street protests over rising income inequality. Chile plans to issue a total of $3.5 billion in international bonds in 2020.

To help finance the stimulus plan, the government said it would increase its debt sales in foreign currency next year to 40% of all bond issues, up from 20% in recent years.

"We want to give space to Chilean corporates to issue in the domestic capital markets in local currency," Pérez said. "This is an adjustment. We'll evaluate next year whether we transition back."

Chile's green bond sales in 2019 allowed the country to lock in historically low rates and broaden its investor base. The 2050 green bond in dollars had a yield of 3.53%, the lowest ever obtained by Chile. In the euro deal, Chile achieved a yield of 0.83% on its 2031 green bonds.