QCOSTARICA — If you have debts in colones or dollars, you can have a peaceful end and beginning of the year, since interest rates will remain stable and the dollar to remain cheap.
The recent placement of Eurobonds (Eurobonos in Spanish) by the government of Rodrigo Chaves has had a calming effect on the market, ensuring stability and progress.
Having US$1.5 billion dollars will allow the Ministry of Finance (Treasury) not to have to borrow in the domestic market and that will not put upward pressure on interest rates.
“The effect on interest rates will not be immediately downward, it will be perceived in the first half of 2024, but people can be calmer that their loan payments will not increase in these months, nor will the exchange rate, since this money will not enter the market, but rather the Treasury will use it to exchange expensive debt for cheap,” Daniel Suchar, financial analyst, told La Republica.
The number of investors who demanded the Costa Rican bonds during the placement allowed a 31-year yield of 7.75% to be achieved and offers for US$5.1 billion were received, more than triple what was needed.
The country needs a lot of dollars as it must assume debt maturities up to US$2.7 billion by 2024, of whichUS$1.6 billion must be paid in the first five months of the year.
Costa Rica’s legislators approved the placement of US$5 billion in international markets in three years.
In March of this year, the first issue was made for US$1.5 billion, by 2024 US$1 billion will be issued, and the same amount in 2025.
Additionally, the Government plans to use budget support resources close to US$1.738 billion, of which US$651 million are in the process of negotiation with organizations such as the World Bank and the Government of Canada. The remaining resources will come from loans by the International Monetary Fund (IMF).
What are Eurobonds?
A Eurobond is a bond issued offshore, external debt securities that the government uses to finance itself, denominated in a currency other than that of the issuer’s country. Eurobonds are usually long-term debt instruments and are typically denominated in US Dollars (USD).
These are some features:
- They are not necessarily titles in euros, Costa Rica issued them in dollars
- They are sold in major international markets, such as New York and London
- Any country can make use of them
- Interest rates are more stable
- No competition for local market resources
- They expire in terms of 12 and 26 years