MercoPress. South Atlantic News Agency

Investor confidence in Uruguay allows for local currency bond issue

There is a lot of confidence in the Uruguayan economy, according to Arbeleche.

Uruguay placed on the market a new 10-year peso bond for the equivalent of US $ 1,166 million at an interest rate of 8.25% per year, reported the Minister of Economy, Azucena Arbeleche. It is the lowest interest rate in the historical comparison of emissions by Uruguay.

“Uruguay culminated with a successful issuance of two bonds, which shows us the confidence that investors around the world have in the Uruguayan economy today and in the future, because they are 10-year maturity bonds,” Arbeleche said at a press conference in Montevideo. 

She added that “the response we have had today shows that there is great confidence in the Uruguayan economy and the management that is being carried out in our country”.

The minister explained that “Uruguay issued what is the star instrument, a bond in national currency, in nominal pesos, which is not linked to inflation, for a total amount equivalent to 1,166 million dollars”.

He continued: “Our country is the first country this year to issue in its own currency. This speaks to us of the confidence that exists not only in our country but also in the Uruguayan currency.”

“The interest rate of this global bond is 8.25 per year and is the lowest rate in the historical comparison in the issues that Uruguay has made,” said Arbeleche. This is Uruguay's third such issue.

Arbeleche also explained that “the transaction is completed with a part of an issue in dollars that is the reopening of a bond that we already had matured in 2031, and its amount is 574 million dollars, and here the distinctive element that shows confidence in the country is the rate differential that investors are asking Uruguay for compared to lending their money to the United States”.

The official pointed out that “the government's financing programme will continue through 2021, with the aim of financing measures designed to protect the most vulnerable sectors and support economic reactivation and post-covid-19 employment. The fixed-rate peso bond market will also continue to develop, establishing a new benchmark bond at an intermediate-term.”

“The financial programme for this year foresees a total government bond issuance of 3.86 billion, between what the government issued this Thursday plus what it has issued and what it will issue in the second half of the year in the local market, [representing] 85% of the projected financing needs for this year,” she said.

“The transaction did not mean postponing debt but financing the projected deficit for this year, with expenses, in reference to the covid-19 pandemic, that were not contemplated in the national budget. What we are doing is raising funds to finance these expenditures on very good terms, with a view to economic recovery,” she added.