(QCostarica) Last week, the director of Public Credit Ministry of Finance Ministerio de Hacienda (Crédito Público del Ministerio de Hacienda), Juan Carlos Quirós, reported that it began advertising on the Bloomberg website, with the purposed of attracting foriegn savers.
Quiros explained that investors would be able to access information on bond auction schedules. Hacienda also expects banks will share this information to let their foreign investors know they can also access the domestic market.
The government is looking to take advantage of the current good external environment, with the rise in Costa Rican bond prices.
According to Quiros, there is a reshuffling that benefits emerging economies and Costa Rica. “The issue of Brexit has made that markets take refuge in other types of securities, such as U.S. Treasury bonds; that has led to a movement in the spread (margins among foreign bonds and Costa Rica) that has benefited us,” said Quiros.
Thelmo Vargas, former Minister of Finance, says the strategy to place public debt denominated in dollars among foreign investors, is favourable in the short term, because it reduces the burden of current interest and pressure on the domestic financial market. “But says the problem, by bringing more foreign exchange, contributes to downward pressure on the exchange rate, which is a disincentive to exports of goods and services with high local content,” he added.
In addition, Vargas said, it exposes the Government to currency risk. If in the future the exchange rate rises, the cost of government debt maintenance in colones will rise.
In a statement by the Ministerio de Hacienda (), for the remainder of the year the government plans to issue US$1.115 billion in the local market, and launch a new type of debt instrument to encourage investment in longer maturities.
From a statement issued by the Ministry of Finance:
The Ministry of Finance announced this afternoon (July 20, 2016) the financial measure it is planning consisting of a gross placement of ¢960 billion colones for the second half of the year, of which 37.5% has already been raised.
Among the projects for the second half of the year is the opening up of phase II of Direct Treasury, via the internet, to a greater number of public entities and private banks and other financial institutions. In addition, is the creation of a new title called Sovereign Adjustable Title Deed (known as TPRAS), indexed to the sovereign curve calculated by the Central Bank (BCCR), to promote long-term placement by investors.
Click here for the full release (in Spanish)
Sources: La Nacion, Central American Data, Ministerio de Hacienda
