Paraguay targets investment grade and dollar-denominated bond issues

Paraguay targets investment grade and dollar-denominated bond issues
Paraguay targets investment grade and dollar-denominated bond issues

Bloomberg — Paraguay’s Finance Minister said the country is close to achieving investment grade status, amid a roadshow for the sale of foreign bonds in dollars and also a possible issuance in Guarani for global investors.

“We are in the final stretch” for an increase in the credit rating, said minister Carlos Fernandez Valdovinos in an interview. “I’m sure it will be this year.”

Paraguay is one of the fastest growing economies in the region, and has been praised by rating agencies in recent years for its consistent economic policies, low inflation and disciplined public spendingbut achieving investment grade has been difficult due to weaknesses in the rule of law and corruption.

Moody’s has maintained the neighboring country’s rating with a positive outlook since 2022. The country’s credit rating is one level below investment grade at Moody’s and Fitch, and two levels below at S&P Global Ratings.

Paraguay is moving forward with changes to pensions and public service that could lead to an upgrade, said Fernandez.

O government plans to sell 12-year bonds in dollars now and evaluates an issue in local currency in the foreign marketas did Chile, Jamaica and the Dominican Republic last year.

The slowdown in inflation allowed the country’s central bank to reduce interest rates by 2 percentage points since August, to 6.5%, and analysts consulted by the monetary authority expect an additional drop of 1 percentage point by the end of 2024.

The government has approval to issue a total of about $1.2 billion of debt this year to finance the budget, although sales could rise to as much as $1.5 billion if market conditions are attractive enough to buy back some existing titles, Fernandez said.

“We have bonds maturing in 2026, 2027, 2028, so we’ll see if we can start doing some liability management,” Fernandez said.

The government is also evaluating its first sale of bonds linked to sustainability.

“We have informed investors that we will likely issue green bonds in 2025,” Fernandez said, adding that details still need to be decided.

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