The debt buyback strategy launched by El Salvador on July 26 has drawn the attention of the international community and the markets, which reacted with a sudden rise in national bonds by 50 points that same day and continued to present a positive outlook.
In this scenario, the vice president of Exor Latin America and an expert in the international stock market, César Addario, confirmed that “the stock market has reacted positively to the announcement made by President Nayib Bukele.”
The executive explained that the price traded for the bond due in 2023 increased by $11.01 between July 25 and July 27; while the bond maturing in 2025 also registered positive impacts. Proof of this is that its yield was placed above that of 2023, at 44.61%, and its price increased by 36.63%, quoted at $48.40.
“We hope that the positive impacts will continue to occur in Salvadoran sovereign bonds as the estimated time to execute the first repurchase operations approaches and, above all, after they are carried out,” added Addario.
Meanwhile, the Minister of Finance, Alejandro Zelaya, reiterated in an interview for the international media, CNN, that the proposed strategy is within the framework of market rules and that it is carried out in a public and transparent way to offer investors the alternative of selling the bonds under current market conditions or waiting for the payment term of January 2023.
He also met the criticism regarding the necessary funding for the country to make the repurchase a reality and explained that in addition to the funds granted by the International Monetary Fund (IMF) known as Special Drawing Rights (SDR), the country also has financial support from other multilaterals.
“They are not the only funds we have; we have pending disbursements. Collection revenue has increased by up to 26%. We have access to the Inter-American Development Bank (IDB) and the Central American Bank for Economic Integration (CABEI) », he declared to the international media.
Regarding the 275 million in SDRs, which average about $360 million, he also stressed that it is not a loan but rather funds from the Republic of El Salvador that are in the accounts of the Central Reserve Bank (BCR), to which the country agreed, like the rest of the IMF member countries, as part of the support provided by this entity in the framework of the COVID-19 pandemic.
“The assets used for this new strategy belong to the Republic of El Salvador. They were provided by the IMF but they are freely available,” he asserted.