History seems to be repeating itself, but in reverse. While developed countries, especially those in Europe, are struggling to find a solution to the debt crisis, Latin American countries are enjoying relatively stable conditions, especially in the sphere of international finance. Guatemala is no exception. Its government debt bonds are sought in the international market, where they are perceived as having relatively little risk and a satisfactory ability to pay.
For this reason, the cost of protection against a possible suspension of Guatemalan debt payments is very low, especially when compared with countries such as Italy, Spain or Greece. In the case of Italy, the CDS, or cost of insurance against a suspension of payments, amounted to 5.89%, while the CDS Guatemalan bonds was just over 1%.
While the likelihood of a cessation of payments is minimal in Guatemala, where over the years commitments made by the government have always been honored, the country should seek to keep its debt levels low and manageable. This seems to be the opinion of several experts in the field, as is such as Miguel Gutierrez, of Central American Business Intelligence. In an article on s21.com.gt, Gutierrez says: "Just because the probability of default is low it does not mean that the situation in Guatemala is not delicate, as in recent years debt contracts have been above average and we do not have a tax burden that can cover it. In addition, he notes, the approval by Congress of an under-funded budget for 2012 is already anticipated. And, he adds, there must be a tax reform which would eliminate the need to start every year with the endless task of approving the debt."
Source: sigloxxi.com
More on this topic
April 2011
The Ministry of Public Finance has placed more than $50 million in dollars and quetzals on the market.
The treasury bonds have been issued both in quetzales and dollars, each for various time periods.
A report by Byron Dardón to La Prensa Libre states: "Of the total registered bonds, 81.8% are from the private sector and 18.2% from the public sector .
July 2011
The treasury has issued 2% less bonds than planned, due to poor investor appetite for these securities.
In the first six months of the year, the Ministry of Finance intended to raise ¢975 billion ($ 1.933 billion) in the local market. However, poor demand for securities in national currency has forced the agency to aim for a figure slightly lower than projected.
June 2010
The operation, conducted in the local market, will help finance the country’s “Program for Supporting Social Policies”.
The 15-year securities will pay an interest rate of 6.7%, informed the treasury ministry.
“According to the institution, the issue was mostly bought by ‘small, individual investors’, who acquired the bonds through stock brokers; other purchasers were Retirement Funds”, reported Elsalvador.com.
June 2010
On June 15 the Finance Ministry will start selling $560 million in Treasury Bonds in the domestic securities market.
They will use an auction-based method to sell the securities, and they are currently considering whether to offer the bonds in the international market.
“The issue will be split in 2-year, 5-year, 7-year, 10-year and 15-year securities, and the interest rates will be defined by the market.
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