Paraguay’s Move Towards Investment Grade

Paraguay’s Finance Minister, Carlos Fernandez Valdovinos, has revealed the country’s close approach to achieving investment-grade status.

This step is key as Paraguay promotes the sale of dollar bonds and plans Guarani-denominated bonds for international investors.

Valdovinos, showing confidence, anticipates a credit upgrade soon.

Paraguay stands out as a fast-growing economy in its region, praised for stable economic policies, low inflation, and controlled public spending.

The nation is near investment grade, with a positive outlook from Moody’s since 2022. However, challenges related to legal systems and corruption remain.

Fernandez points to pension and public service reforms as potential catalysts for a credit boost.

The country’s credit rating currently sits below investment grade with Moody’s and Fitch and two below S&P.

The government plans to issue 12-year dollar bonds and considers local currency bonds for the international market, akin to efforts by Chile, Jamaica, and the Dominican Republic.

With inflation slowing, Paraguay’s central bank reduced interest rates to 6.5%, and further cuts are expected by the end of 2024.

Paraguay aims to issue about $1.2 billion in debt this year, possibly increasing to $1.5 billion if market conditions allow.

This strategy would facilitate repurchasing existing bonds maturing in the coming years.

Additionally, the government is exploring sustainability-linked bonds, with potential green bond issuance by 2025.

Paraguay’s pursuit of investment-grade status and diverse bond offerings signify its dedication to economic growth and stability.

These actions show proactive financial management and a commitment to sustainable development.

Paraguay is strengthening its economic future by appealing to global investors and effectively managing its liabilities.

This progress is essential for the nation’s resilience and integration into the global economy.