LatinFinance - September/October 2013 - 86

PARAGUAY
BONDS

The sovereign is hoping to lead the way in courting capital to Paraguay.
Boosting foreign investment will be key to its ambitious infrastructure plan.
By Jason Mitchell

Mass appeal

n January, one of latin america’s smallest, poorest and least
known economies notched up a triumph in its bid for foreign investor
recognition.
Paraguay, a landlocked nation of just nearly seven million, successfully issued a $500 million, 10-year bond, the sovereign’s cross-border
debut. the deal, underwritten by citi and Bank of america merrill
lynch, was more than 11 times subscribed and offered a yield of just
4.625% — the bottom end of pricing guidance.
the bond issue served its purpose, says Roland Holst, acting governor of the central bank. its main objective was “to put Paraguay on the
financial map,” he says.
“Before it was issued, the country was completely unknown. now, a
lot more investors have become interested in Paraguay. We have had
asian and american investors visit us for the first time. We have manged to raise the country’s financial
profile and a lot more foreign groups are
considering making direct investments in
the country, too.”
Paraguay’s new government, which took
office in august, is seeking further global
debt issues as part of its efforts to deepen
the country’s relationship with foreign
investors. Plans are being hatched for
another international bond of at least $500
million next year.
But repeating January’s success won’t be
easy: the authorities now fear that achieving
such favorable terms may no longer be
possible once the US federal Reserve
starts withdrawing its stimulus measures.
While $500 million remains the minimum
target, if market conditions are poor, the
government may opt for a smaller initial
tranche, which could then be re-opened
when the environment allows, Holst says.
any sharp rise in US treasury yields

86 l atinfina nce.com - September/October 2013

NEW WIND: Paraguay’s new government
hopes to increase international investor
interest.

would scupper such plans, though a
modest rise in 10-year treasuries to 3.5%
next year would still allow Paraguay to
issue the new bond, he says. the sovereign
also considered issuing a global depositary
receipt at the start of the year and could
also reactivate such plans before the end of
the year.
Germán Rojas, the country’s finance
minister, tells LatinFinance that “the challenge for Paraguay is to improve its credentials in order to have more access to the
market in the future.”
When Paraguay tapped the market in
January “capital flows were looking for
attractive investment destinations; this
was important and we took advantage
of this,” he says, even though “there was
some uncertainty about changes in global
economic policies”.
international financial markets have
“suffered important changes in recent
months” following the fed’s indication
that it would end its bond buying program,
Rojas says.
Proceeds from any bond issuance will
be used primarily to finance Paraguay’s
ambitious infrastructure program. Both
previous and present governments
agree that the country must invest more
in highways, airports, ports, utilities
and railways if it is to fulfill its economic
potential.
the new center-right government, led
by former businessman Horacio cartes,
is determined to raise the investment rate
above its paltry 16% of GDP, one of the
region’s lowest.
“the new government wants to fill
in all the missing infrastructure links,”
says Sebastien lahaie, chief executive
at abbeyfield Group, an international
financial services firm which owns
Sudameris, Paraguay’s fifth largest bank
in terms of assets. “Highways in Bolivia,
argentina and Brazil stop at the border with

http://www.LATINFINANCE.COM

LatinFinance - September/October 2013

Table of Contents for the Digital Edition of LatinFinance - September/October 2013