Another rate hike in Colombia looks likely as inflation expectations for 2008 and 2009 continue to be high, according to BBVA. “Non-food inflation is above the central bank’s goals,” says Juanita Tellez, a senior economist with the bank, who declined to specify how much of an adjustment is needed. February inflation indicators, to be released Saturday, could accelerate a rise if they are high. “If not, the central bank will wait and see how global economy continues to develop,” says the analyst. Recent appreciation of the peso is meanwhile attributed to weakness in the dollar, “something that a small economy like Colombia cannot control,” Tellez says. Colombia last week raised the reference rate to 9.75% from 9.50% in a surprise move that followed higher-than-expected January inflation data.
Category: Bonds
Colombian Pension Funds Slow to Change
Changes announced last week by Colombian regulators to rules governing pension funds are likely to have only a gradual impact, owing to strength in domestic markets. The Superintendencia Financiera announced last week a long-awaited increase in equity investment limits – to 40% from 30% – and on investment in international securities, to 40% from 20%. “This is a very good sign,” Felipe Gaviria, VP in asset management at Santander Colombia, tells LatinFinance. “It’s always good to be able to expand your portfolio. However, the impact will be minimal at first.” Gaviria explains that attractive prices in local bonds and equities will prevent pension fund managers selling significant amounts to buy foreign securities. In the long term, though, there will likely be some increase in international assets. Investment of up to 5% in local and offshore private equity funds is also now permitted, subject to certain rules. Although pension funds may invest in infrastructure projects – which Gaviria says are a good long-term investment – via PE, he would like them to be able to make direct equity investments.
El Salvador Constrained by Growth
Fitch has affirmed El Salvador at BB+ (stable) based on a stable monetary and economic environment and a good record on structural reforms, including the implementation of DR-CAFTA. The agency expects growth of 4% in 2008-2009, led by the agriculture, tourism, manufacturing, and services sectors. “Higher growth remains critical for El Salvador’s dollarized economy to keep public debt dynamics on a downward trajectory, as well as to improve social conditions and increase per capita income,” says Casey Reckman, associate director in Fitch’s sovereign group.
Investors Launch Microfinance Group
A group of buysiders launched Tuesday in New York the International Association of Microfinance Investors (IAMFI), an organization dedicated to the growing sector. Sam Moss, president of Gray Matters Capital in Atlanta, GA, which manages a portfolio of social investments, has been appointed as IAMFI’s chairman. The organization’s goal is to facilitate capital flows between private sector sources, investment vehicles and microfinance institutions. LatAm is home to a number of successful microfinance projects, including Compartamos, a publicly traded MFI, and Peru’s Mibanco.
Brazil Inflation Seen Good for Fixed Income
Brazil’s IPCA inflation rate eased to 0.54% in January from 0.74% in December, below expectations and bullish for fixed income. A decline in food and fuel will give relief to macro economists fretting over region-wide price increases. “The lower-than-consensus IPCA inflation is good news for local fixed income market, which has been rallying on the back of lower inflation releases for February,” says Goldman Sachs. “This should also at least contain, and possibly even reduce expected IPCA inflation for both 2008 and the next 12 months,” it adds. However, it sticks to the view that the Copom will have to raise the Selic to curb credit growth and domestic demand expansion to avoid breaching IPCA targets in 2008 and 2009. But it sees the probability of a rate hike in March as low.
AmBev to Buy Back Quilmes Shares
Brazil’s Ambev says it will buy back $385.6m of shares in its subsidiary Quilmes Industrial, following the expiration of a tender offer. AmBev accepted for purchase 3.1m class A shares at $4.125 per share, 8.2m class B shares at $41.25 per share, including 7.2m B shares held as ADS. The total represents 57% of the outstanding A shares and 94% of outstanding B shares. AmBev launched the offer December 28, and will own 99.26% of Quilmes upon its settlement February 15. Credit Suisse was dealer manager on the sale.
IDB Signs Brazil Transmission Deal
The IDB has approved a $200m financing for ATE III Transmissora de Energia for development, construction, operation and maintenance of transmission lines in the Brazilian states of Para and Tocantins. It includes an A loan of up to $95.4m from the bank’s ordinary capital and a syndicated B loan of approximately $104.6m. The project, with a total estimated cost of $387m, was awarded to the Spain’s Abengoa through a public bidding process. It is developing the project through its Brazilian subsidiary ATE III Transmissora de Energia. The transmission project includes: a 500kv, 40km transmission line connecting the Maraba and Itacaiunas substations in Para; a 230kv, 110km transmission line connecting the Itacaiunas and Carajas substations in Para; a 500kv, 304km transmission line connecting the Itacaiunas and Colinas substations in Para and Tocantins; and a 500/230kv Itacaiunas substation in the state of Para.
Usiminas Buys Mining Assets for $1.85bn
Brazilian steel company Usiminas has agreed to purchase three mining operations in Brazil for a total of $1.85bn, say people close to the deal. The company told the CVM over the weekend it bought J. Mendes, Somisa and Global Mineraçao for an initial payment of $925m. The deal includes an earnout agreement whereby Usiminas will pay an additional $925 based on the performance of the assets. Credit Suisse advised J. Mendes on the sale of the asset. Separately, Usiminas is heard to have just hired investment banks to arrange a syndicated loan.
CIE to Buy Back at Least $146m in Bonds
Mexican gaming operator CIE got tenders and consents from holders of $146m, or 79%, of its 8.875% 2015 senior notes, as of the January 31 early deadline. Holders have until February 15 to tender the remaining notes for $1,025 cash per $1,000 in bonds. The repurchase is funded with excess cash resulting from recent asset sales. Citi is dealer manager.
Corporate Bond
High YieldComeback King In a year chock full of corporate biggests and bests, one high yield deal stood out as the trailblazer. Mexican glassmaker Vitro’s $1 billion dual tranche issue […]