Colombia’s Eurobond Magic Trick: Lower Debt Costs, Bigger Long-Term Risks

Colombia’s government is back in Europe asking investors for money, only weeks after selling its first euro-denominated bonds in almost a decade.

On paper, the plan looks smart: issue new, cheaper bonds in euros and use the cash to buy back old, expensive dollar and peso debt. In practice, it is a high-wire act that pleases markets today while pushing real budget choices into the future.

The finance team in Bogotá has hired Goldman Sachs, JP Morgan and Santander to arrange new eurobonds with short- and medium-term maturities.

This comes on top of a record €4.1 billion issue in September, the largest euro deal ever by a Latin American government, split into 2028, 2032 and 2036 notes.

At the same time, officials invited investors to swap out of older dollar bonds and into this new euro “curve,” making Colombia look more like a sophisticated European borrower than a traditional emerging market.

Behind that, however, sits a web of complex transactions. The government set up a roughly $9.3 billion total-return swap with several global banks, tied to a mix of Colombia’s own bonds and even U.S. Treasuries, while those same banks bought back billions of Colombia’s dollar bonds for cash.

Colombia Buys Time but Fiscal Risks Persist

Bogotá is also negotiating up to $10 billion in low-rate Swiss-franc loans to fund more buybacks. At home, it carried out the largest swap ever of local TES bonds, rolling about 43.4 trillion pesos into longer maturities and cutting near-term interest costs.

For now, markets approve. Risk spreads have narrowed and key bonds trade well above par. To discipline-minded investors, Colombia looks like a country trying to manage its debt burden proactively, using every tool available.

But the political backdrop tells a different story. The government has suspended its fiscal rule, is running the biggest deficit since the pandemic and has already suffered ratings downgrades. More borrowing in euros and francs also increases currency risk.

The message is clear: Colombia is buying time with clever engineering. Whether that ends in a safer debt profile or a harsher adjustment later will depend less on Wall Street ingenuity than on Bogotá’s willingness to control spending and respect basic fiscal discipline.

This article was produced by The Rio Times’ automated newsroom system. How we use AI · Report an error