Colombia has moved closer to securing an investment-grade rating after Standard & Poor’s raised its long-term foreign currency sovereign credit rating on the Republic to BB+ from BB, just one notch below the level needed. “The upgrade is supported by Colombia’s significantly improved growth prospects and fiscal performance,” said S&P credit analyst Richard Francis. Nevertheless, the ratings agency emphasized the need for further tax and pension reform to improve the government’s fiscal prospects and lighten the debt burden, which would in turn lead to higher creditworthiness. It warned that “significant fiscal slippage or a sharp deterioration in national security” could, in contrast, have the opposite affect. US investment house Goldman Sachs, commenting on the upgrade, felt the ratings action was earned and thought that “consolidating and deepening the fiscal adjustment should remain the top priority for Uribe’s second presidential term”. It added that progress in this area could lead to an upgrade from Fitch in the “immediate future”, as well as Moody’s. Goldman concluded that Colombia could reasonably expect to achieve investment grade status “towards the end of 2008 or beginning of 2009”.
Category: Regions
Colombina Plans Bond Issue
Colombian food company Colombina is to issue longer-term debt to extend its debt profile. Colombina hopes to raise around $22.3 million (50 billion pesos) in local-currency, 10-year bonds, said the company. The securities will pay a maximum of the inflation index plus a spread of 6.10 percentage points, reported Dow Jones. Corficolombiana structured the deal.
Multi Credit Bank Buys Control of Macrofinanciera
Panamanian Multi Credit Bank has agreed to buy a 70% controlling stake in Colombian financing house Macrofinanciera. The deal between the local Castellanos family, which owns 100% of Macrofinanciera, and Multi Credit Bank is expected to be finalized by the end of May. No financial details were offered. Macrofinanciera has assets totaling $15.4 million (34.4 billion pesos).
Mexico Inflation Fears
The continuing high price of corn, and in turn the cost of Mexico’s staple food – the tortilla – is continuing to put pressure on prices in general and are sparking fears of a rise in inflation as the price rises spill over into other sectors, such as wages. Mexico’s core inflation rate, which excludes energy and some fresh foods, rose to 3.95% for the 12 months through mid-February, from 3.89% in January. Meanwhile, annual headline inflation was up to 4.1% through mid-February, passing the 4% government target.
Panama Economy Expands 8.1%
Panama’s economy grew by 8.1% last year, compared with 6.4% in 2005, according to official government figures. Construction was the most dynamic sector, rising 17.4%, banking expanded 12.8%, hotels and restaurants grew 12.5%, and trade was up 11.3%.
Bolivia, Jindal Finalize El Mutún Deal
Bolivia and Indian company Jindal Steel have finalized an agreement to develop the El Mutún mine, which contain Latin America’s largest iron ore deposits. Last year, the Indian company was awarded the 40-year concession to develop the deposits by the newly elected government of Evo Morales in return for a commitment to invest $2.3 billion in the project over 10 years. However, problems agreeing terms – in particular with regard to the price to be paid by Jindal for the supply of natural gas – meant delays in closing the deal. The final agreement sees the Indian firm paying two rates for gas – one rate for gas used to produce iron and another for the gas used to run a thermoelectric facility at the mine. Bolivia’s government says the final prices are 80% higher than those originally proposed by Jindal and say the state stands to make a profit of around $300 million a year from the mine once operational, which could be in three to five years’ time.
Colombia Inflation Gathers Pace
Colombia’s inflation gathered pace in February, with prices rising 1.17% during the month, according to national statistics bureau DANE. February’s prices took inflation for the 12 months through February to 5.25%, overshooting the government’s 4%-5% target range. Education costs drove the hike in prices, rising 3.94% in the month.
Mexican Opposition Lawmakers Block Hurtado Nomination
Mexico’s president, Felipe Calderón, looks to be facing opposition from lawmakers in his attempt to push through the nomination of Carlos Hurtado for a seat on the board of directors of Mexico’s Central Bank, Banxico. Opposition senators are blocking the appointment because of Hurtado’s former position as deputy finance minister in charge of spending under Vicente Fox’s administration. The five-member Banxico board has had a vacant seat since the end of last year.
Peru February Inflation Picks Up Pace
In Peru, the price of food, clothing and education drove up prices in February by 0.26%, the fastest rise in 10 months. Annual inflation for the 12 months through February fell to 0.36%, the lowest rate seen since August 2002.
Multivalores To Start Operations Friday
Mexican financial group Multivalores is to start its banking operations, Banco Multiva, on Friday. The group, which already owns a brokerage, an investment fund operator and a leasing company, applied for a banking license last May because it wanted to consolidate its position in the financial system. Mexico’s banking sector is dominated by foreign-owned institutions such as BBVA, Santander, Citi and HSBC.