Brazil and Peru should continue to raise benchmark rates, Goldman Sachs says in a note. The shop has altered its call, to a 60% probability that the October Copom meeting will reduce the pace of Brazil rate hikes to 50bp from 75bp. It expects additional hikes in December and January, resulting in a SELIC of 15.25%, with no decision to ease expected until October 2009. Goldman finds that in Peru, external turmoil is becoming grave enough threat to inflation to call for a raise to 7.00% by December, despite strong growth momentum. “We believe the economy is well prepared to weather a less favorable external environment. Tighter policies and softer global growth should slow real GDP growth, but without interrupting the current growth cycle,” it says.
Category: Bonds
IDB to Lend $60m to Peru’s BBVA Unit
IDB will provide up to $60m in loans to Peru’s BBVA Banco Continental to strengthen its capital position and expand its mortgage origination and lending for small businesses. The non sovereign guarantee financing consists of a senior loan of up to $30m and a subordinated loan of up to $15m from the IDB. Another subordinated loan of up to $15m will come from international investors. BBVA will use the subordinated loans to grow its mortgage origination business, the IDB adds. Pricing was not disclosed.
CAF Approves Credit Line to CR’s Recope
CAF has agreed a $50m short term revolving credit line for Costa Rican state run electricity distributor Recope. The financing is intended to cover working capital expenditure, CAF adds. It is the third such deal for Recope, which imports, refines and distributes fuel.
IDB Mulls $400m Panama Canal Loan
The IDB has offered a $400m loan to help meet the $2.25bn the Panama Canal Authority (PCA) expects to borrow to finance its expansion projects, it said. The IDB and PCA have reached agreement in principle on the proposed terms for a non-sovereign guarantee loan, a proposal for which will be presented to the IDB’s board for consideration in early October. The IFC is also considering lending up to $500m to the project. The authority has said that development bank pitches total more than the amount it needs to borrow, which would allow it to skip commercial bank financing if it stays on budget. Definitive financing plans for the project are expected in the fourth quarter.
IDB Supports Health, Education in Guatemala
Guatemala will receive two loans for a total of $350m from the IDB to fight malnutrition and improve health and education, the multilateral says. A $200m loan will finance a conditional cash transfer program called Mi Familia Progresa targeting chronic malnutrition and truancy in priority municipalities. The financing includes a 20-year $139m loan with a 5-year grace period, at a variable interest rate, with a parallel concessional financing of $61m. The multilateral will also provide a 25 year, 5-year grace period, adjustable interest rate $150m loan to improve preprimary and primary education.
Energy Efficiency May Save $36bn: IDB
LatAm and Caribbean countries could save an estimated $36bn over the next decade by adopting affordable and available technologies to improve energy efficiency, according to the IDB. The region would need to invest roughly $17bn in compact fluorescent lighting, efficient motors and other measures to achieve a 10% reduction in electricity consumption by 2018, according to the multilateral. “Savings would amount to approximately 143,000 GW/hour,” the IDB says. But if the region does not become more energy efficient, it will need to build an estimated 328 open cycle gas-powered electricity plants (250MW each) just to produce the same electricity, according to the report. “At today’s prices, using extremely conservative assumptions, it would cost around $53bn to build those plants,” the IDB says.
IDB Approves Honduras Grid Financing
The IDB has approved $48.5 in financing for Honduras to increase the capacity of its country’s power grid. The financing includes a $20m 30-year loan with a 5.5-year grace period and an adjustable interest rate and a $8.5m loan from the IDB fund for special operations, with a 40-year term and a 0.25% interest rate, the IDB adds. The program has been prepared on the basis of a second $20m IDB loan expected to be approved in 2009, the multilateral states.
Cabei Cracks Open Honduran Local Market
Tegucigalpa-based regional development bank Cabei has priced a 3-year local currency note in its home country via its MTN program. Bank officials claim the deal is the first issuance in the local market by a non-native borrower – Cabei is a supranational bank. The floating rate deal is for 100m lempira, or $5m, and priced 40bp through the 182-day central bank bill, which was recently at 10.51%. “The central bank issues at a maximum of 1 year in Honduras and this is a 3-year deal,” says Cabei treasurer Felix Magana. Citi Credito placed the notes with banks and insurance companies. Cabei plans two more CentAm local currency issues this year: a $50m equivalent 5-year note and a $25m 7-10 year note, says Magana.
IDB/Ixe Bring Mexico PCG
The IDB is setting up its first capital markets guarantee facility in Mexico to help local corporates access domestic debt markets at better terms. The facility of up to 450m UDIs ($180m) will be set up in partnership with IXE Casa de Bolsa to provide credit enhancements for Mexican businesses, including financial companies and SPVs. The providers are targeting deals in MXP for the equivalent of $20m-$100m in size. The partial credit guarantees, which will be reimbursable in MXP, will help companies with local ratings of at least BBB place debt securities at tenors of more than 3 years. They are also aimed at achieving greater access to local institutional investors, whose portfolios mostly hold government and corporate bonds rated at least AA.
Brazilian Highway Scores Loan
IDB has approved a $100m 25-year loan to Brazil for expansion of its Florianopolis-Osorio highway, part of the Mercosur corridor, which is a major road for transport of goods between Argentina, Brazil, Paraguay and Uruguay. The facility has a 4.5 year grace period and is priced at Libor flat, an IDB official says. Brazil’s national department for transportation infrastructure (DNIT) will carry out the program.