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Tuesday, November 29, 2022

China positions itself in Latin America and proposes to buy El Salvador’s debt

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The situation in El Salvador is part of a scenario of generalized debt crisis among poor countries, which was denounced by the United Nations Development Program (UNDP).

The state is trying to reorganize its foreign debt to avoid going into default. Currently, it has about $670 million in bonds due January 24. The Central American nation repurchased bonds maturing in 2023 and 2025 with a public offering that closed in September. In addition, he hoped to launch a new offer to acquire the remaining debt, which is trading at around 90 cents on the dollar this month.

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El Salvador has a rating by S&P Global Ratings of CCC+, which places it as a speculative grade investment, vulnerable and dependent on favorable commercial, financial and economic conditions to meet financial commitments. This grade is seven notches below investment grade. This is the lowest risk rating in Latin America.

However, Ulloa announced that in January there will be a second public offering, before the principal payment is due. The country resorted to the holdings of the so-called special drawing rights, assets managed by the International Monetary Fund and distributed in 2021 to help mitigate the impacts of the pandemic.

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The Ministry of Finance together with the Central Bank are preparing the conditions for the second repurchaseUlloa continued.

Although El Salvador probably will be able to avoid a sovereign default in 2023“In our baseline, reserves would be wiped out if the government paid the 2025 eurobond call,” Oxford Economics analysts wrote. Philip Camargo Y Lucilla Bonillain a note last month.

Source: Ambito

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