Paraguay Eyes Market, But Will Wait

Paraguay still has a long-term goal of tapping the international capital markets, but must first resolve a court case involving a defaulted loan and will also likely wait until the country achieves an investment-grade rating, government officials told LatinFinance at the sidelines of the IMF meetings. A Swiss court has ruled that the nation must pay debt holders interest and principal on an $80m loan extended to a Paraguayan diplomat in the 1980s during the dictatorship of Alfredo Stroessner. The government cannot tap the bond markets “until we resolve that,” the official said. Besides, he added, the country is in good fiscal shape and does not require the funds. Citigroup had been working with the government, but does not necessarily have the mandate for any upcoming issue, he said. The sovereign is still several notches below investment-grade, but was recently upgraded to BB- from B by S&P. This came on the back of increased fiscal flexibility thanks to the Brazilian government’s agreement to raise the country’s share of revenues generated from the Itaipu Dam. As a result, Paraguay’s revenues are expected to increase by 1.5% of GDP, allowing it to fund much needed-infrastructure. Earlier this year, BBVA Paraguay priced its $100m 3-year bond to yield 9.75% via Citi and BBVA, issuing what was thought to be one of the first cross-border dollar deals to emerge from the country. The Reg-S only transaction was rated Ba3.