Colombia issues international bonds amid more pandemic spending

(Bloomberg) – Colombia is selling dollar bonds for the second time this year, joining the wave of Latin American countries that have resorted to borrowing as part of a strategy to counterbalance the spending generated by COVID-19.

The benchmark bond is expected to be sold on Monday, with 2032-maturing securities released at a 205 basis point spread over the yields of similarly maturing U.S. Treasuries, while the maturing papers in 2042 they are discussed at 235 basis points over Treasuries, according to a person familiar with the matter.

Colombia, which raised US $ 2 billion in foreign bonds in January, is out on international markets for the second time this year, following the sale of US $ 2.5 billion this month from Mexico. Peru, Chile, Panama, the Dominican Republic and Paraguay have also tapped into the markets this year as part of the $ 52 billion in loans from Latin American governments and companies through April 18. The most for the same period since 2017, according to data compiled by Bloomberg.

On Monday, the Andean nation’s longest-maturing bonds fell, and notes due 2061 fell 1.3 cents on the dollar to about 92 cents, according to data compiled by Bloomberg.

The Government expects to get around US $ 10 billion in foreign debt this year, including the sale of bonds and loans from multilateral organizations, as it increases spending to combat the effects of the coronavirus pandemic. The fiscal deficit is projected to skyrocket above 9% of gross domestic product.

Over the past month, Covid-19 cases have increased in the country, prompting authorities to order new restrictions aimed at curbing the spread of the disease. So far, Colombia has reported more than 2.6 million cases, the highest number in Latin America after Brazil and Argentina.

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Tax Reform

The country is on the verge of losing its investment grade credit status, with two agencies rating it BBB-, one notch above junk.

Last week, the Minister of Finance, Alberto Carrasquilla, presented a tax reform bill to Congress, the objective of which is to obtain new income and, at the same time, curb poverty by delivering cash transfers to the poorest households. The bill proposes around 11.7 trillion pesos (US $ 3.5 billion) of extraordinary expenses related to the pandemic, most of which will be financed with debt and the sale of state assets.

Colombia’s economy is forecast to recover around 5% this year after a record contraction in 2020. Urban unemployment is above 18%, which is lower than last year’s high, but well above average. pre-pandemic levels.

According to the document to the United States Securities Commission, Bank of America Corp, Citigroup Inc and Morgan Stanley will act as underwriters for the sale of Colombia.

Original Note: Colombia to Sell More Dollar Bonds, Adding to Covid Debt Binge

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