Guatemala is planning a $500 million bond sale toward the
middle of the year, likely in international markets, finance
minister Alberto Fuentes Knight told Emerging Markets
in an exclusive interview.
He also said Guatemala is talking to the IMF about entering
its Flexible Credit Line (FCL) programme.
On the possible bond issue Fuentes Knight said:
Its going to be $500 million. We are going to send
[the proposal] to Congress next week. We see good opportunities
for issuing abroad, with low yield.
The bond sale will be part of a bid to roll over the
countrys $350 million global bond coming due next
Fuentes Knight declined to say whether Guatemala had chosen
an investment bank to lead the sale. He also said there was
still a possibility of issuing in the local debt market, where
there is considerable liquidity.
Economists are warning that as developed countries start
issuing more debt, emerging markets nations could have
difficulties issuing at good rates unless their fiscal policies
are in order.
While impoverished by a 36-year civil war that claimed
200,000 thousand lives before ending with 1996 peace accords,
Guatemala has historically been one of the most fiscally
prudent countries in Central America.
But it also has one of the regions lowest tax takes as
a percentage of GDP, and one of the conditions of peace accords
signed between leftist guerillas and the government was to
raise that tax take.
Fuentes Knight said that Guatemala was advancing rapidly on
a new fiscal reform proposal, and that his ministry hoped to
come to a major agreement as early as next week to take the
process forward although he acknowledged that
politically it would be challenging.
Its not easy because were a minority
government, he said.
On the possibility of starting an FCL programme with the
IMF, Fuentes Knight said: Its a good idea, because
Guatemala has very solid macroeconomic fundamentals.
Weve spoken to people from the Fund [about an
FCL] and they recognize that the central American countries
[...] have played a pioneering role in coming to agreements
with the fund in times of crisis. This type of agreement [FCL]
could have a very significant impact in terms of
Guatemala, like other small and open economies often
has the reputation of following the fortunes of the US,
he said. Last year proved that isnt always the