Paraguay Finance Minister Carlos Fernández Valdovinos
Credit: IDB Group

Paraguay will continue to press ahead with plans for its sustainable bond debut, but with a prospective issuance now expected next year on account of fiscal constraints in 2024, its finance minister Carlos Fernandez told LatinFinance.    

The minister said tight budget restrictions were “the only reason” the ministry would not pursue the move this year, as had been widely expected.

“I do not have fiscal space. That is the only reason we are not doing green financing this year,” Fernandez said in an interview on the sidelines of the IDB annual meetings in the Dominican Republic.  

Paraguay last month issued its first guaraní-denominated bond in international markets, in a dual-tranche offering that comprised $500 million in 6% bonds due 2036 and PYG3.64 trillion in 7.9% bonds due 2031. 

Fernandez said that adhering to fiscal limits allowed Paraguay to unlock IMF funding. The multilateral lender in December approved a two-year $400 million so-called Resilience and Sustainability facility for the country.    

“I have a restriction on the deficit,” Fernandez said. “This is also the reason why we could get money from the IMF — we are going to comply with the target for the first semester this year, but we are not going to withdraw all the money.” 

Fiscal prudence – including reestablishing a fiscal deficit rule by 2026 – remains a priority of the administration as it seeks to secure an investment grade rating. Paraguay is currently one notch below investment grade following an upgrade last month to BB+ by S&P, which cited economic stability as well as an abundant supply of renewable energy resources.  

INVESTMENT GRADE

Fernandez said Paraguay is firmly on the trajectory towards an investment grade rating. 

“I’m not obsessed [by this issue]. It could be imminent if we continue to do the right things,” he said, noting that “the last notch is the most difficult to get.” 

However, he said that the country was complying with key requirements of the ratings agencies, including increasing the proportion of local currency debt issued, most notably via January’s issuance. 

“This is a new door open for us, and we will continue to use it going forward,” Fernandez said. “This was the first time. Imagine the second time. Going forward, probably we will have higher demand [for] guaranis.”  

“We decided that instead of asking [foreign investors] to go to the local market, we can go to the international market and offer them a bond denominated in guaranis. It was a success,” Fernandez said.  

He said the sovereign typically issues on the international market once a year in January, although last year it issued $500 million worth of 5.85% 2033 bonds in June after waiting for a market window at a time of rising global interest rates. 

S&P said the country’s investment projects should sustain Paraguay’s economic growth at around 3% between 2024 and 2027. 

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