Vol.19 No.0530 Thursday Edition, May 30, 2019
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The approved amount for this Eurobonos Law is $1.5 billion in U.S. dollars or their equivalent in any other currency / A.M. Costa Rica wire services photo

Deputies approve Eurobonds bill

By the A.M. Costa Rica staff

The deputies of the Economic Affairs Committee of the Legislative Assembly unanimously approved bill #21201 on Wednesday. It is called the Authorization for the Issuance of Securities in the International Market and the Agreement of Credit, known as the Eurobonds Law.

According to the deputies, the project authorizes the government, through the Ministry of Finance, to issue securities to be placed on the international market to convert internal debt into external debt to cancel the external debt to improve conditions in terms of better interest rates.

The approved amount for this Eurobonos Law is $1.5 billion in U.S. dollars or their equivalent in any other currency, during the year following approval of the law.

To use this law, the Ministry of Finance must submit the budget support agreements negotiated with the specific multilateral financial organizations to the deputies of the Legislative Assembly.

According to the legislature, this project becomes strategic because it provides room for improvement in portfolio risk management by reducing concentration in short-term and fixed-rate securities, improving the risk exposure of the portfolio. Additionally, this project opens up different possibilities for the use of the new authorized emissions.

The government may exchange, consolidate, convert, renegotiate or restructure any of the country's debt still in circulation in the national and international markets, as well as new issues authorized by this law, "as long as it results in a benefit for the country," said the legislature in its statement.

With this law, the Ministry of Finance has an instrument that will allow it to diversify funding sources, reduce the cost of resources and significantly improve the structure or composition of public debt, thus managing the risks associated with the portfolio.

According to the deputy Luis Ramón Carranza, "today more than ever we are asking to the Government Economic activation so that resource in some way comes to contribute with the issue of employment and the issue of economic reactivation ".

On March, as A.M. Costa Rica reported,
Minister of Finance, Rocio Aguilar, met with the deputies of the National Liberation political party to clarify their doubts and request support for the bill presented by the government.
The government requested that the deputies of the Legislative Assembly provide authorization for the issuance of $6 billion in Eurobonds.

The Eurobonds  bill  allow the government to issue bonds of $1,5 billion per year in the first two years, plus $1 billion per year for following next four years.

Minister Aguilar stated that "the purpose of the Eurobonds is that the country can capitalize on a fiscal reform that took many years and turn it into opportunities with better financing for economic reactivation."

The meeting with the deputies of the National Liberation Party was the last of the meetings held by Minister Aguilar with all the parties of the Legislature.

Minister Aguilar said that the project to issue Eurobonds does not mean more debts for the government, only a renegotiation of the part of the current debts, "in much better conditions, at rates much lower than what we would be paying here" (referring to local bonds market).

According to Minister Aguilar the main advantage of the renegotiation of debt with Eurobonds is a reduction of 1.15 percent of GDP.


Is using this new instrument to negotiate better terms for the national debt a positive move for the government?    We would like to know your thoughts on this story.  Send your comments to:

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