Category: Central America

In response to rumors, Guatemala’s Banco Industrial categorically denies that it is up for sale. “That’s absolutely false,” Diego Pulido Aragon, director of Corporacion Banco Industrial, tells LatinFinance. “The bank is not for sale. There aren’t even any discussions about it. There is no interest in selling to anyone,” he affirms. Industrial is leading the consolidation drive in Guatemala and also looking to other Central American markets. Pulido expects to announce a Honduras acquisition in two weeks and says a purchase in El Salvador should follow. Industrial has 28.5% of the market by assets, according to Fitch. Industrial’s ROA (1.2% at year-end 2006) and ROE (16.8%) place it among the most profitable of Guatemala’s large banks. But after relying on shareholder investment for capital, Industrial must now devise other means of raising funds, and Fitch identifies capitalization as the weak point in the country’s banking system. The bank is considering a public offering.

The IMF has approved a loan worth about $111.3m under the Poverty Reduction and Growth Facility (PRGF) to support Nicaragua’s economic program. It will result in an immediate disbursement of approximately $18.5m. PRGF loans carry an annual interest rate of 0.5% percent and are repayable over 10 years with a 5.5–year grace period on principal payments. “Nicaragua has made important strides over the last years. Macroeconomic stability has been strengthened, vulnerabilities reduced, and poverty-reduction spending expanded, while important progress has been made with structural reforms,” says IMF deputy MD Murilo Portugal.

The IFC has signed an agreement to help Banco de Finanzas in Nicaragua develop a housing finance line of credit for low and middle-income families. The multilateral will provide a $15m long-term financing for the program. In addition, Banco de Finanzas became the first issuing bank in the country to join IFC’s global trade finance program. IFC will also provide advisory services to help Banco de Finanzas expand its products for micro, small and medium enterprises. “This project is consistent with IFC’s strategy in Central America, which aims to help accelerate private sector development,” says Jyrki Koskelo, IFC director for global financial markets. In fiscal 2007, IFC invested $76m in CentAm private sector projects.

Ashmore Energy International (AEI) has acquired additional interests in the 234-megawatt Puerto Quetzal Power and 71-megawatt Empresa Energética Corinto fuel oil-fired power plants in Nicaragua, it said in a statement. The terms of the transactions, closed today, were not disclosed. Houston–based AEI acquired a 25% additional indirect interest in Puerto Quetzal and a 30% additional indirect interest in Corinto by exercising its right of first refusal with power producer Globeleq. AEI also acquired an additional 20% indirect interest in Puerto Quetzal from Centrans Energy Services, and sold to Centrans 15% of the newly acquired interest in Corinto. Upon closing of the transactions, AEI increased its indirect ownership in Puerto Quetzal from 55% to 100%, and its indirect ownership in Corinto from 35% to 50%.

Guatemala’s bonds have traded only marginally higher following Sunday’s election results which led to a runoff scheduled for November 4. The bonds do not appear to be affected as the market expected the contest to go to a runoff, says a trader whose shop trades the notes. Former general Otto Perez Molina will face center-left businessman Alvaro Colom, after Colom won the first round with 28%, to Perez Molina’s 24%. Neither candidate is expected to alter Guatemala’s current monetary policy. “We expect the outcome of the election to be largely neutral from a credit standpoint,” according to a Bear Stearns in a report.

S&P has revised the outlook on its BB/BB+ (foreign-currency/local-currency) long-term ratings of Guatemala to positive from stable. The improvement reflects the country’s “growing prospects for policy continuity after the 2007 national elections, based upon a solidifying consensus on key economic policies”. S&P affirmed its BB long- and B short-term foreign currency sovereign credit ratings on the Republic of Guatemala and its BB+ long- and B short-term local currency sovereign credit ratings. According to S&P GDP growth this year is expected to reach its highest level in more than 10 years – at around 5%.

Venezuela’s state-run mobile phone operator Movilnet is considering setting up a joint venture company in Nicaragua, reports Dow Jones, quoting the company’s president Jacqueline Farías. Movilnet is part of Compañía Anónima Nacional Teléfonos de Venezuela (CANTV), which was nationalized earlier this year.

The Republic of Guatemala has mandated Deutsche Bank for a dollar bond issue. Carlos Santizo Reyes, head of capital markets at the country’s public credit bureau, tells LatinFinance that the deal is still in its early stages, and timing and amount have yet to be decided. But bankers say the offering could be for up to $300m and longer than 10 years. Guatemala has a $150m bond coming due in August and additional maturities in 2011, 2013 and 2034.

Remittances to Guatemala for the first quarter of this year reached $886.7m, an increase of 11.8% compared with the same period last year, according to the central bank. Economists predict that remittances by families living abroad – most in the US – will total $4.2bn by the end of the year.