LatinNews Daily - 17 October 2024

*El Salvador’s government led by President Nayib Bukele has announced a deal with the US International Development Finance Corporation (DFC), an independent agency of the US government, and Latin American development bank (CAF) which would allow El Salvador to refinance part of its debt and help fund the conservation, water security, and ecosystem restoration in the Rio Lempa watershed, one of the longest rivers in Central America. The arrangement also involves El Salvador’s environmental investment fund (Fiaes), which was set up by the government in 1993, US-based humanitarian agency Catholic Relief Services (CRS) and Cayman-based private credit fund and financial advisory firm ArtCap Strategies. Describing it as the “world’s largest debt conversion for conservation of a river and its watershed”, the DFC said in a statement that the deal involves US$1bn in financing for El Salvador’s repurchase of US$1.031bn of its outstanding bonds at discounts to par. All savings generated by the transaction are to be applied over time to support conservation, water security, and ecosystem restoration in the watershed. According to the statement the transaction will enable the Salvadorean government to “realise more than US$352m in lifetime savings through a combination of immediate notional debt savings and material reductions in debt service cost”. Under the deal, which was arranged by US multinational finance company JPMorgan Chase & Co, the DFC is providing US$1bn in political risk insurance (PRI) while CAF is providing a US$200m standby letter of credit (SBLC).