Peru pressed ahead in 2024 with its long-standing public debt strategy that again featured a significant multi-tiered liability management exercise – one of the largest in the region –
aimed at refinancing the front end of the sovereign’s local currency curve while further curtailing the proportion of dollar-denominated sovereign debt.
The transaction, which wins the award for Sovereign Liability Management of the Year, consisted of an exchange and tender offer targeting local currency sovereign bonds with maturities between 2024 and 2029 and a cash tender offer targeting US dollar and euro denominated global bonds with maturities between 2026 and 2031.
The sovereign also tapped the marked with a Euroclearable 15-year sustainable bond in local currency (PEN7.0 billion, or the equivalent of $1.84 billion), with a coupon of 7.65% — a transaction which also made Peru the second largest issuer of sustainable bonds in Latin America, according to BofA.
José Arista, Peru’s finance minister, says the transaction’s success raises the odds of further such efforts in the coming year, especially in the context of an improving economy. “We are always looking for windows of opportunities to go to the market and we will take advantage of them,” he says.
“What we did [in 2024] was to reprofile the debt. We had debt coming due between 2025 and 2031. This means that the administration that takes office in 2026 will be in a better fiscal position,” he tells LatinFinance, noting that “financing is not an issue for Peru. We have a debt-GDP ratio of 32% and our economic pillars are solid.”
President Dina Boluarte’s government is looking at two issues while it studies its options. It needs to address a problem with the fiscal deficit, one of the trouble spots in 2023 and 2024, and it needs to finance infrastructure.
The fiscal deficit in 2023 was 2.8% of GDP, above the 2.4% target. The target was originally 2% for 2024, but changed to 2.8%. Arista says that target would be missed and the deficit could come in as high as 3.7%.
He says Peru needs to invest heavily in infrastructure if plans to becoming a logistic hub thanks to the new Port of Chancay, expanded airport in Lima, the capital, and nearby Port of Callao. The three facilities are within an 80-mile stretch of coast. Arista estimates that the country’s infrastructure gap could be as high as $40 billion.
Arista says Peru will have no problem attracting investment thanks to the country’s macroeconomic stability. The government forecasts growth in 2024 at 3.2%, compared to a 0.6% contraction in 2023. It was the first time Peru’s economy contracted since the 1990s, with the exception of 2020, the pandemic year.
Inflation in 2024 was 1.97%, according to the Central Bank – the lowest among the region’s large economies and down from 3.2% in 2023 and 8.5% in 2022. The Central Bank’s inflation target band is 1-3%.
Arista also highlights the stability of local currency, which moved only 0.7% against the U.S. dollar last year, increasing international reserve that topped $81 billion in 2024 and export earnings about $70 billion, another annual record.
“We have solid economic pillar, which means that we can go to the market and emit debt in the short or long term, in dollars or soles, and the market will respond favorably,” Arista says.
Global Coordinators & Joint Bookrunners: Bank of America; Citi; JP Morgan; Santander
Bookrunners’ Counsel: A&O Shearman; Rubio Leguía Normand
Issuer’s Counsel : Davis Polk; Hernandez & Cia
All supporting financial institutions and law firms were transmitted to LatinFinance by the award category winners. For updates please email awards@latinfinance.com