Colombia Ponders GDN

Colombia is considering issuing its first global depository note to draw international investors into its local debt market, Michel Janna, Colombia’s head of public credit, tells LatinFinance. The government is advancing plans to curtail issuance of COP-denominated Treasury (TES) bonds next year by at least COP2trn ($1.04bn), opening up space for a GDN, pending an appropriate structure for dealing with the country’s 14% withholding tax. “There are a couple of banks with the idea of launching GDNs for Colombia. We encourage this: if it’s done in the proper way, there will be an advantage for the local market. It simplifies the procedure for investors to tap the local market,” Janna says. The sovereign will consider issuing hard currency debt in the new year, though timing will depend on an increase in US Treasury yields “by up to 50 basis points in the next two to three quarters” and Colombia’s presidential elections in May, he says. Further diversification of Colombia’s funding currencies is desirable, but not imminent. “It’s a possibility that we could go for euro or yen transactions at some point, but not in the immediate future,” he says. The government is establishing a centralized treasury, where public entities with high cash balances – including the airports agency, the oil agency and the telecoms fund – will be required to deposit their excess cash, instead of in TES, as has been the norm. The result will be a decline in TES issuance by public entities of at least 2 trillion pesos in 2014 and 6 trillion pesos thereafter, though the scheme, which will be fully implemented y 2015, will not impact the TES primary market.