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Banking

Local currency bonds: CAF paves the way in bolivares

The development of Latin America’s local capital markets continues apace following the first bond issue by a multilateral organization in Venezuela in 30 years. The bond, worth B215 billion ($100 million) and with a five-year maturity, was launched last month by CAF, the Andean development bank. It is the biggest non-government bond issued in Venezuela.

Enrique García, president and CEO of CAF, says that the deal fits with the bank’s aim of helping develop its member countries’ capital markets. CFO Hugo Sarmiento adds: “It provides local institutional investors with a portfolio diversification opportunity [and the bond] should have an active secondary market.”

More local liquidity

The deal, which was arranged by Citigroup, appealed to Venezuela’s growing investor base, including banks, insurance companies and mutual funds. “There is significant demand for bolivar-denominated securities due to an increase in liquidity in the local market,” says Sarmiento.

The deal, which took several months to arrange, could prove to be a watershed in Venezuela’s capital markets history. A shallow market, high inflation rates and currency instability made it difficult to issue in the past. In addition, regulatory hurdles prevented multilaterals from easily tapping the market. But in May the local supervisory body, the Comisión Nacional de Valores, introduced a new regulatory framework making it easier for multilaterals to issue bonds.

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