The Ecuadorian Social Security Institute (IESS) plans to invest $330m in the electricity, mining and oil sectors. The IESS has more than $700m in the central bank earning 2.5% and is looking to find a project return of 22%. The institute wants to move from short into long-term investment, says IESS director Hector Eguez.
Category: Regions
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Aureos Pushes into Andes with $300m PE Fund
Aureos, a global fund focused on mid-market private equity, is raising $300m for its Aureos Latin America Fund (ALAF). The vehicle marks the manager’s first push into Peru and Colombia, Erik Peterson, regional director for LatAm at Aureos, tells LatinFinance. “Private equity interest in Colombia and Peru is increasing,” says Peterson. He notes that a relatively recent turnaround in those countries’ politics and security situations is driving a boom in investment from corporates and financial investors. The ALAF will also target Central America and Mexico. Aureos has two smaller funds of $36m and $21m dedicated to CentAm and Caribbean, while in Mexico it has already closed two deals. The vehicle’s strategy will be to seek out both control and minority deals in various sectors, including education, non-bank financial services, healthcare, logistics, tourism, housing and transportation. ALAF, a 10-year vehicle targeting returns of 20% or more, is Aureos’ largest global regional fund, and tops the manager’s several vehicles in Asia. Peterson attributes the larger size to opportunities he sees in LatAm, and the fact that the maximum investment per deal for ALAF is $10m, unlike the $5m at which it usually caps its investments. Aureos hopes to have $300m for the fund raised by June.
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Mexican Energy Reform Proposal May Boost Bonds
The energy reform proposal sent to the Mexican congress by president Felipe Calderon is an important first step to improving the country’s oil sector, Fitch’s senior director of foreign ratings Shelly Shetty tells LatinFinance. “We’ve seen a decline in production levels in Mexico and clearly a reform is needed to maintain and boost both investment and production levels in the oil sector,” she says. But this is not an optimal reform, Shetty says, since it does not permit full scale private sector participation. “However, it does allow for greater financial and budgetary flexibility for Pemex, and allows for enhanced corporate governance which should help the company to increase investment in the sector,” the analyst states. If the reform were to pass, it would have a pretty important symbolic importance, given the continuous opposition in Mexico to allowing any form of private participation in the oil sector. “One has to monitor the political debate,” Shetty says. Impact on Pemex and sovereign bonds will depend on how far the proposal advances in congress, says Alfredo Coutino, senior economist for LatAm at Moody’s Economy.com. “If there is a lot of resistance, we will not see a positive answer in the bonds and in the ratings of the country and the company,” Coutino says. However, if the reform is approved even with modifications, bonds will receive a positive boost. “In the medium to long term the answer will be positive for the bonds,” he adds.
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Metrofinanciera Preps MXP2.5bn Issue
Metrofinanciera is preparing to sell MXP2.5bn in 6-year bonds backed by construction bridge loans this month. The floating-rate offering denominated in UDIs or pesos will include an A tranche and a subordinated B tranche, the proportions of which have not been determined. Ixe is managing the sale.
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Peru Sees Sol Bond Sale by Month End
Peru plans to hold another auction of sol-denominated bonds by the end of this month, Jose Miguel Ugarte, executive director of public credit, tells LatinFinance. A $900m-equivalent program kicked off March 27 with the placement of PES273m ($100m) in 2026 bonds at 6.96%. As announced earlier this year, Peru will repay $1.1bn in multilateral debt using a combination of its own treasury surplus and the issuance of sol-denominated bonds through regular sales. Ugarte says Peru is still deciding on the exact mix of its own funds and debt that will form the repayment. A dollar offering this year is unlikely, he explains, given the current state of the US market and Peru’s ability to manage its own financing. Other items on the finance ministry’s agenda this year include supporting reform that increases the amount that pension funds can invest in international assets and the creation of a “Lima-bor” floating interbank benchmark rate, the official says.
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Ecuador Says Economy in Best Ever Shape
Financing much needed oil, hydro electric and road infrastructure projects in Ecuador is not a problem, as the sovereign enjoys what finance minister Fausto Ortiz de la Cadena calls the best financial position in its history. Ecuador has received an additional $3bn in oil revenues and reduced debt payments by $1.2bn since the star of 2007, Ortiz tells LatinFinance. The county has also accumulated $2bn in international reserves and $1bn for potential investment in social security. Combined, the Andean nation has a comfortable cushion. “To face the crisis and improve its infrastructure, now Ecuador has close to $8bn [in extra reserves]. That never happened in the past,” Ortiz states. Additional savings of $50m could come as a result of the reduction in Libor, over which much of the country’s debt is priced. The minister adds that dollarization will remain in place, since devaluation of the US currency makes exports more competitive.
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Colombia Mulls Mexico-Style Fund
Colombia’s finance ministry is considering starting a national infrastructure fund similar to Mexico’s Fonadin, finance minister Oscar Ivan Zuluaga tells LatinFinance. Encouraged by the recent appearance of private equity in the country, he explains, the government would like to start a vehicle where public and private money would join to fund infrastructure projects. Colombia is in discussions with banks about possible advisory roles in such a fund. Zuluaga declined to comment on the size of the fund, or a timetable for its creation. The government is planning a roadshow in the coming months to promote both its sovereign credit and investment in its infrastructure projects. Public credit director Viviana Lara tells LatinFinance that the finance ministry is not planning to issue any new debt at this time, as its funding needs are met. It may, in the second half of the year, begin considering COP debt options, with the goal of getting its peso debt to 60% of its total debt from the present level, around 40%.
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Colombia Seeks $18bn for Infrastructure
Colombia is looking for $18bn in private capital to build infrastructure, according to Carolina Renteria, Colombia’s minister of planning and development. This is part of a $38bn in infrastructure investment plan for 2007-2010, in which the Andean nation is trying to attract interest. Recently, several airports in the country were snapped up by a group of Chinese and Colombian investors. “We are becoming known to different investors in the world,” says Renteria. “This is very good because it’s a new source of investment.” Colombia plans to invite investors to bid in the Ruta del Sol project, a highway connecting Bogota with the Caribbean coast, as well as a highway to link Bogota to Buenaventura, and the La Linea tunnel project, among 15 road concessions expected in 2008. The electricity sector will also be opened up for investors, with auctions planned in May, Renteria says. “There is a public commitment and we are putting in money from the budget, but we are inviting all investors for what we think will be great opportunities,” she adds. Besides roads, Colombia is also developing airports, ports and logistics.
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Ecuador Puts Infrastructure and Relief First
Liability management is not a priority for Ecuador, which is focused on financing much needed infrastructure projects, the country’s finance minister Fausto Ortiz de la Cadena tells LatinFinance. “We need to channel our resources to building oil and hydro electric infrastructure, and the reconstruction of several roads,” says Ortiz. Relief efforts for recent floods on the coast are also top of the list. “We don’t want to put liability management above an emergency,” Ortiz says. Ecuador will continue to focus on cost-cutting measures that have saved the country $400m in Q1, the minister says. “In our policies to lower financial costs, we take into consideration everything, including our global bonds,” Ortiz adds.
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Ecopetrol Foreign Tranche Talk Revived
Foreign investors could eventually buy shares in state-controlled oil company Ecopetrol, says Carolina Renteria, Colombia’s minister of planning and development. The offering of 10% of company shares would be a sequel to last year’s blowout IPO, which was targeted at locals. Renteria declined to state when the overseas tranche would be done. The first placement of 10% to retail and pension funds was so well bid that the company achieved its financing target in the first round, precluding the need for further raises. “It has become a driver of change in the Colombian stock market,” says Renteria. Bancolombia led the local offering and Credit Suisse and JPMorgan were slated to underwrite the international portion. Merrill Lynch and Citi were valuation advisors. The law allows up to 20% to be sold.