Peru is also set to improve its debt profile by prepaying $1.5 billion of debt owed to the Paris Club group of lenders in the first half of the year, according to a report by Dow Jones. The country owes around $5.75 billion to the Paris Club in total. It last prepaid debt to the lenders in 2005 when it also arranged to clear $1.5 billion. Last year the government said it was aiming to reduce the ratio of its foreign public debt from 78% of total debt to 69%, converting it into domestic debt by the end of 2007. The move will help protect Peru from external shocks say economists.
Category: Regions
Posted inDaily Brief
Exito Opens Share Sale
Colombia’s largest food retailer, Almacenes Exito, began selling shares on Monday to raise an estimated $117 million. Exito is selling 24.7 million shares, representing 11.8% of the company’s capital to help finance the acquisition of local rival Carulla Vivero, which it agreed to buy last year for $433 million. Last month, the company secured a loan worth $300 million arranged via a group of foreign banks led by JPMorgan Chase.
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AES Powers Up in Mexico
Global power company AES may be out of Venezuela but it has just agreed to pay $611 million to buy two power generation facilities in Mexico from subsidiaries of Exelon Corporation and Alstom. According to the Virginia-based company, the plants – Termoelectrica del Golfo (TEG) and Termoelectrica del Penoles (TEP) – supply power to Cemex and Penoles, respectively, under 20-year agreements. “The acquisition of these two plants enables AES to expand our strong platform in Mexico,” said Mark Woodruff, AES vice president of North America Development.
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Ecuador to Pay 2030 Coupon in Grace Period
Ecuador has announced it will pay the coupon on its 2030 global bond, but during the 30-day grace period and not on the due date of February 15. Up until now, the government has been unclear about whether it would pay the $135 million interest and had indicated a debt restructuring or even default might be on the cards. In the end, it appears that more pressing domestic issues have made negotiations with international debtholders a lesser priority. However, analysts are unclear as to why Ecuador has chosen to delay the coupon payment, thereby incurring more costs. “[I]t is hard to understand the rationale for the government not [to] pay on the due date”, commented Goldman Sachs. “In our view, the decision to delay the payment is driven mostly by the domestic political agenda as the government tries to score political points by spinning the decision as evidence that external debt payments are not the government’s top priority”, continued the investment house.
Deputy finance minister Fausto Ortiz, who announced the government’s intention to delay the interest payment, also explained that the government plans to shrink debt servicing costs by $500 million next year and will seek to extend the maturity on a $400 million loan secured from the Latin American Reserve Fund (FLAR) in 2005.
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Simec IPO Raises $250 Million
Mexican steel company Grupo Simec has raised $250 million via a global public offering of 60 million shares. The company priced its ADS on Friday at $12.50 per ADS and in the local market its shares priced at 45.70 pesos per share ($4.17). The global offering included an overallotment of 7.8 million shares. Citigroup Global Markets acted as global coordinator; Acciones y Valores Banamex, Casa de Bolsa Integrante del Grupo Financiero Banamex, and Ixe Casa de Bolsa, Ixe Grupo Financiero, were the joint bookrunners in the Mexican tranche.
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Bolivia Nationalizes Glencore Assets
Bolivia has nationalized the assets of Swiss natural resources company Glencore, prompting calls from the Swiss government for Bolivia to honor international obligations and compensate the company. The Bolivian government has made no mention of whether Glencore will be compensated for its loss. Last month Bolivia announced it was to repossess the Vinto tin foundry, owned by the Swiss company, because the assets had been sold illegally by the government under former president Gonzalo Sánchez de Lozada. The nationalization of Vinto is part of a wider program announced last year to return mining assets to state control.
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Peru and Venezuela Re-establish Relations
Peru and Venezuela have resumed diplomatic relations following a row last year in which Peru broke off relations citing interference in domestic politics by President Hugo Chávez. Peru has appointed Luis Santa María Calderón to be the new ambassador, due to take up his post on March 1, while Venezuela has named vice-admiral Armando Laguna Laguna, former head of the Navy, as its man in Lima.
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Mexico Headline Inflation Eases
Mexico’s central bank, Banxico, released its January inflation figures showing that headline inflation eased somewhat while core inflation rose significantly, driven by continuing high prices of maize and tortillas. Monthly headline inflation fell to 0.52% from 0.58% in December taking inflation for the 12 months through January down below the 4% target ceiling to 3.98%. Core inflation for the month was up from 0.43% to 0.50%, taking annual inflation up from 3.61% to 3.89%. So far, the price hikes in certain foods have not crossed over into general price rises and analysts believe that interest rates will likely remain unchanged this month.
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Mexico Pension Funds Need More Options
Mexico’s pension fund industry must evolve if it is to provide private sector workers with decent pensions for retirement, a panel at LatinFinance’s second Cumbre Financiera Mexicana in Mexico City, concluded today. Jose Eduardo Silva, CEO of Afore Profutoro said that pension funds must be able to invest more in floating rate instruments, credit derivatives and structured products to boost returns. Silva acknowledged that while second-stage reforms had helped to broaden investment alternatives, Mexico has not done enough to stimulate competition among pension funds. He noted that although fees had decreased dramatically, not enough has been done to boost performance. Moises Schwartz, chairman of CONSAR, Mexico’s pension fund regulator, noted that pension funds have not embraced the wider range of investment products available to them since the second-stage reforms in 2004 and 2005. Pension funds invested 71% of their assets in government debt last year compared with 95% in 2000 with just over half of the 21 funds preferring to concentrate portfolios in Mexican treasuries. Francisco Gonzalez, CEO of BBVA Bancomer’s Afore and chairman of the national association of pension funds, argued that public-sector funds should join the defined contributions system to create a national pensions system. And the industry must encourage workers to contribute more to pensions on a more regular basis. Pension fund assets in Mexico grew to 8.1% of GDP last year, with $65 billion in assets under management, from 3.1% in 2000, representing a compounded annualized growth of 16%.
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Mexico’s Banco IXE To Launch $100 Perp Bond
IXE Grupo Financiero, a Mexican bank, is set to launch a $100 million perpetual bond callable after five years. Goldman Sachs is the lead manager on the deal, which will begin its roadshow this week and look to price by the end of next week, according to bankers away from the deal. Fitch expects to assign a B+ rating to the securities.