Guatemala eyes bond after 'positive' IMF review

Guatemala eyes bond after 'positive' IMF review

Corporate & Sovereign Strategy Economy & Policy Bonds Debt Capital Markets Fixed Income Politics Guatemala Central America US Asia

Guatemala could return to the cross-border bond market this year to lower its financing costs, thanks a favorable review by the IMF and the solid prospects for economic growth, the economy minister told LatinFinance.

"I understand there is a plan for a bond," Acisclo Valladares said during the 28th Apparel Sourcing Show in Guatemala City. "The IMF's visit and review was very positive. Guatemala is doing well macroeconomically, although we still need to improve our fiscal revenues."

Valladares did not go into details about the bond issue, other than to say that the finance ministry is working on it.

Abelardo Medina, an economist at the local think tank Icefi, said the government could sell around $500m in new notes and lower its average financing costs to 6.5%.

Guatemala's Congress has approved up to $2bn in bond sales this year, but most of that amount has already been placed in the local market, Medina said.

Meanwhile, Valladares said Guatemala's GDP is on the rise and the prospects for foreign direct investment are improving, echoing views that an escalating trade war between China and the United States could benefit the country, especially in the textile industry.

At the opening of the trade fair, President Jimmy Morales said the South Korean clothing manufacturer Sae-A will invest $200m to build a new yarn thread factory in Guatemala to meet surging demand for exports to the United States. He also said Grupo Karim's from Honduras will spend $70m to build a facility in Guatemala.

Helped by rising shipments of garments — the country's top export — and a strong local market, Guatemala's GDP is set to grow 3.4% this year, up from a 3.2% increase in 2018, the IMF said after its visit earlier this month.

Valladares did not give an FDI figure for this year but said it will likely surge after the general elections on August 11. Morales is not allowed to seek a second term.

The news that moves markets

Read the day's transactions and rumors right in your inbox.

Start free trial