Uruguay is second Latin American country to issue bonds in Japan with no guarantee from JBIC

RIO DE JANEIRO, BRAZIL – Uruguay’s Ministry of Economy and Finance on Thursday issued a press release announcing that the transaction was completed on Wednesday (01).

The statement highlighted that, despite living in a context of uncertainty and volatility both regionally and globally after the emergence of the Omicron variant of Covid-19, the Uruguayan government accessed the Japanese bond market with no guarantees from the Japan Bank for International Cooperation (JBIC).

The fact that it did not require the JBIC guarantee implies that Uruguayan bonds are sufficiently reliable for Japanese investors.

“Through this operation, the government secured the largest volume of funding in yen, while obtaining the lowest interest rate in this currency, since Uruguay issued the first Samurai bond in 1994. The government also managed to issue a 15-year term in Japanese currency for the first time,” states the Ministry’s communiqué.

Uruguay thus became the second Latin American country, after Mexico, to issue bonds in Japan with no guarantee from the country’s state-owned guarantor bank in the past 20 years. Japan is highly selective in financing amounts and terms for emerging countries due to its investor base on the market.

The Ministry of Economy explained that the bonds were issued in 5 tranches, with maturities of 3, 5, 7, 7, 10 and 15 years. The volume issued will be concentrated in the 3-year terms for 74% of the total, in the 15-year term for 23% and the remainder was distributed in the intermediate terms.

Nineteen investors were involved in the operation, several of them Japanese, including the JBIC. Daiwa and Nomura banks advised the Uruguayan government and the Ministry of Economy in the issuance.

The goals of the operation were highlighted in the press release. These include complementing the government’s funding program for the year 2021, reducing the debt’s expected interest cost, broadening the investor base, continuing to diversify the markets and currencies of financing sources, and strengthening financial integration and ties with Japan, in the year that marks a century since the establishment of diplomatic relations between the two countries.

URUGUAY AND JAPANESE BONDS

This is the 6th time that Uruguay has succeeded in issuing sovereign debt securities in the Japanese market. In 1994, the first public offering issue of Samurai bonds was made for ¥10 billion (a little over US$88 million) for a term of 3 years, at a rate of 5% per annum. The second time was in 1997, when ¥10 billion was placed for 5 years at a rate of 2.5%. The third time was in 2001, when ¥30 billion were issued, also at 2.5%.

In these cases, there was a “stand-alone” format, i.e. they were made with no guarantee from JBIC.

In 2007, Uruguay issued yen bonds with a guarantee from the Bank of Japan. In that case, the volume issued was ¥30 billion 10-year bonds with an annual rate of 2.23%. The 5th time came in 2011, when it entered the Japanese capital market with a guaranteed 10-year issue for an amount of ¥40 billion at a fixed rate of 1.64% per annum.