Weekly Report - 24 January 2013 (WR-13-03)

PARAGUAY | Revelling in successful Wall Street bond issue. On 18 January the Paraguayan government announced that it had successfully completed the country’s first ever bond issue in the New York Stock Exchange (NYSE), where its issue of US$500m in 10-year bonds offered a yield of 4.62%, the lowest ever for sovereign bonds making their debut in international markets. The previous record was boasted by Bolivia which in a comparable US$500m issue offered a yield of 4.8%. According to Paraguay’s finance ministry, over 97% of Paraguay’s bonds have been acquired by US investors (despite the fact that the country’s current sovereign risk rating is below investment level, the best being at Ba3 [WR-13-02]). This is an unqualified success for the Paraguayan government led by President Federico Franco on two counts. It enables the government to raise much needed funds with which to finance key infrastructure projects in the short time that it has left before the 21 April general elections. It also illustrates investors’ confidence in the Paraguayan economy even as the country faced political instability last year following the impeachment of former president Fernando Lugo (2008-2012) and posted negative economic growth as a result of the negative shocks suffered by its key agricultural sector. Franco pointed out that the fact that the issue was oversubscribed at US$5.6bn, or 11 times its value, demonstrated that investors view Paraguay as “a serious country”. He said that all the funds raised would be used for much-needed infrastructure projects such as repairing and expanding roads and improving the national energy distribution network. Paraguay’s economy ministry calculates that this could boost the country’s GDP by as much as 6%, on top of the 8.5% forecast for this year.