Thursday, 8 January 2009

Courtesy of a Good Friend: Peru Shouldn't Sell Bonds Yet!

A good friend is always a good friend. A good friend always give their friends some good advice. He sent me this ... (click here for link.) In a short note (you don't need to write long pieces as long as you have a clear idea of what you want to say), Diario Correo Peru's Karin Acevedo says it all: It's not the right timing for Peru to tap the international bond market.
We all want the best for Peru -- such an example of organised country, it's remarkable the series of advancements in all fronts (expect social inequality, which seems to stay the same ... awful.) But, talking about finances, it's a gamble this thing of bond sales. Former Economy Minister Pedro Pablo Kuczynski says it is ''rather preferable to wait a bit longer until yields come down.'' He might be right. But there's always the other side -- developed economies probably will rush to obtain funding later on the year, confident that yields will come down a bit more. And they will for sure crowd out emerging market countries in the line for bond funding. Does Peru need the money right away? Probably not -- what do you think dear Otto? But spreads over Treasuries for Peru are quite high given the country's investment-grade status (remember it is not that good to be branded IG, all the toxic debt was IG too!) .. and all that.
Peru may sell 30-year debt at some point (it lacks of a proper debt curve and it has to consolidate it.) But waiting might be a good decision.

1 comment:

  1. Peru doesn't need to sell debt (especially not in USD) so it shouldn't. Colombia needs funds so it should. Really simple, in fact.

    Peru Intl currency reserves are up $3.5Bn YoY...there's a source of countercyclical investment funding. A country with 28m people doesn't need 31Bn sitting there doing nothing unless it's a Vzla with a rapidly expanding M2.