RIO DE JANEIRO, BRAZIL – Peru has joined a select group of countries issuing debt that matures in 100 years, as investors looked beyond the acute political crisis that has engulfed the country in recent weeks.
In a positive comment on the South American nation, the Financial Times writes that Peru launched the sale of US$1 billion of century bonds, in addition to US$2 billion of notes set to mature in 2060 and another US$1 billion of 12-year bonds. The sale comes after some of the most turbulent weeks in Peru’s political history.
The country has had three presidents in that time: Martín Vizcarra was forced to step down after being impeached by Congress and Manuel Merino, who stepped up from being head of Congress, lasted just five days before huge street protests forced him to step aside. Francisco Sagasti, a 76-year-old former World Bank official, has since been sworn in as the country’s interim leader with a mandate to guide it through to fresh elections due in the second quarter of 2021.
“The political backdrop is challenging,” said Alberto Ramos, chief economist for Latin America at Goldman Sachs. “On the other hand, we are living in a world with abundant liquidity.” “We think that Peru is a solid investment-grade credit despite the political volatility,” said Shamaila Khan, head of emerging market debt strategies at AllianceBernstein. “The country has a strong external position and low level of indebtedness.”
Austria, Mexico and Argentina are among other countries to have issued century bonds in the past, with Buenos Aires forced to restructure its debts earlier this year. Peru has been one of Latin America’s fastest-growing economies this century. Its GDP has more than quadrupled since 2000, spurred by Chinese demand for its copper.
The mini-boom, helped by the successful quashing of a Marxist insurgency in the 1990s, lifted millions out of poverty and greatly expanded the middle class. But the coronavirus pandemic cruelly exposed the deficiencies of Peru’s economic model, reminding Peruvians that too many citizens had been left behind, unable to access opportunities reserved for the more privileged in society.
The recent political turmoil has weighed heavily on the country’s assets. The price of a dollar bond set to mature in 2050 has slipped from 163 cents on the dollar at the start of the month to 158 cents. Its currency, the sol, has also suffered, hovering near a record low before strengthening slightly. Despite the chaos, Peru was able to price the century bond at 1.70 percentage points above US Treasuries.