The Dominican Republic continued to break new ground with its public debt management efforts over the past year, pressing ahead with its longstanding strategy to minimize its foreign currency liabilities – while also issuing the Caribbean region’s first green sovereign bond.  

The sovereign went to market in June 2024 with $3 billion triple-tranche bond that included for a $750 million green bond tranche, achieving a rate of 6.70%, roughly 15 basis points lower than what it would have achieved via a non-thematic instrument with a similar terms, according to the finance ministry.

The operation was complemented with a simultaneous repurchase of $1billion of external bonds maturing in 2025. To finance the buyback and to cover part of the 2024 budget, the transaction also featured a record-setting peso tranche: DOP$105 billion (US$1.77 billion) in local currency external bonds maturing in 2036, with a coupon of 10.75%, and US$500 million of a reopening with a maturity in 2031.The local currency tranche, which wins the award for Sovereign Local Currency Deal of the Year, was the largest ever Dominican peso deal and largest orderbook in the country’s history.

Deputy Finance Minister María José Martínez notes that the issuance was part of a strategy to decrease the percentage of foreign currency debt while increasing the average maturity length of the global bond portfolio. This approach, she notes, has been in place since the start of the first administration of President Luis Abinader, who was reelected to a second 4-year term in 2024. 

The peso bond brought debt in foreign currency to 67% of total debt, down from 70%. “This was important for us. It is uncommon to see such a big drop, especially since we issued bonds in U.S. dollars in the same operation,” says Martínez. The country’s nonfinancial public sector debt represents the 46.1% of GDP.

“We have a strategy to de-risk our portfolio from foreign currency debt as much as possible. We have found much more appetite from international investors for local currency thanks to the country’s improving macroeconomic situation.” 

The country’s economic numbers are impressive. The economy expanded by 5.1% in the first 11 months of the year – the fastest among Latin America’s 10 largest economies – and inflation fell to 3.1% through November. Inflation in 2024 will be the lowest this decade, according to the Central Bank. 

The Bank reported that foreign direct investment was $2.4 billion for the first half of 2024, a record. Tourism also continues to break records, with slightly more than 11 million tourists visiting in 2024, up from 10 million the previous year. According to the government, tourism represents $26 billion for the economy, a full 20% of the total. 

Martínez notes that the inaugural green bond contributed to the overall success of the operation. The placement followed shortly after the finance ministry published its green, social and sustainability bond framework for public sector instruments of this type. Foreign investor demand for the securities was six times higher than the amount issued. 

“While the ESG framework had nothing to do with local currency, it did play a role in the demand in the sense that people got the message,” she says. 

The framework allows the sovereign to issue paper in local currency on the international and local markets. Martínez says ministry is likely to issue fresh ESG and local currency bonds in the coming year. The 2025 budget includes the possibility of up to $5.6 billion in debt financing, including bonds and multilateral loans. 

“If you look at our trading levels, we trade below investment grade comparisons. This helps to keep appetite strong and we are going to try to take advantage of this to continue to diversify the foreign currency risk,” she said. 

The Dominican Republic is one notch below investment grade in ratings by Fitch, Moody’s and S&P Global.

Joint Bookrunners: Citi; JP Morgan

Issuer’s Counsel: Cleary Gottlieb

Underwriter’s Counsel: Pellerano Nadal; Simpson Thacher

Trustee: BNY Mellon


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