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By Greg Quinn
(MNI) - Chile may sell more foreign-currency green bonds or other debt
linked to environmental goals in coming years after its latest issue fetched
record-low yields, as long as it can find suitable projects to fund, a senior
finance official told MNI.
The country will also continue broadening global participation in the local
currency bond market with a focus on nominal debt sales, Andres Perez, head of
international finance at Chile's finance ministry, said in an interview Tuesday.
Chile made its first green bond sale in June and this year's
foreign-currency issues, concluded in January, were also green. The ministry
won't tap into strong global demand with extra sales this year because the
borrowing plan is subject to a government limit, and future green bond plans
depend partly on finding projects that qualify for the environmentally-friendly
"We are constantly evaluating different sets of instruments that can not
only allow us to signal our commitment with a given cause such as climate action
in this case, but also that allow us to tap into new pools of investors that in
turn allow us to further diversify our investor base," Perez said. "We could
look into further green bond issuance, but also we we'd like to explore other
types of sustainable bonds, because this is a growing market."
But he noted: "The green bond market as it stands does depend in our case
on the issuer side on a sizable set of projects to fund."
--UNUSUALLY FAVORABLE CONDITIONS
Chile has already finished foreign-currency sales for 2020, taking
advantage of historically low yields despite the hit to its 2019 economic growth
from demonstrations seeking changes to the constitution and more generous public
programs. The government sold USD3.3 billion of green bonds in European and U.S.
markets last month, which the ministry said fetched record low yields of between
0.695% and 3.275% for debt due between 2031 and 2050.
"International financial conditions are perhaps unusually favorable for
this stage in the global business cycle, but we also like to think this reflects
idiosyncratic structural factors that differentiate the Chilean economy with
respect to other EMs," Perez said.
Chile brought in a USD5.5 billion package in December for unemployment
benefits, public works projects and savings for small businesses, and the
central bank also cut interest rates to aid growth. Santiago and other cities
were roiled starting in October after a small hike in public transport costs led
to major street protests. The government has scheduled a plebiscite to move
towards a new constitution for April.
The government made a "transitory" move this year giving smaller companies
more room to sell debt in local currency markets by boosting its own
foreign-currency debt sales, Perez said. The detailed schedule for this year's
$5.4 billion of peso sales will probably be announced in the next few weeks, he
Business investment is the most "variable" part of the budget office's
lowered GDP growth estimate of 1.3% for this year, Perez said, adding there is
evidence of some stabilization around the end of last year. "Data since then has
been better than anticipated and has even reflected a rebound that tends to show
that the economy has been more resilient to these episodes of social unrest," he
While global development authorities credit Chile with being one of Latin
America's strongest economies and chopping the poverty rate to 6.4% from 31%
since 2000, an OECD outlook says "the root causes of the unrest need to be
tackled to boost households' well-being and strengthen business confidence,"
otherwise growth will be slower.
"The policy response and the conviction to use the buffers is there," Perez
said. "We are still managing short-term impact of the social unrest, but we are
making sure that the progress that we are making on several fronts mitigate the
impact of the events on the economy."
"This is something that's happening everywhere, we are seeing episodes in
France, Hong Kong and to varying degrees across the globe."
--MNI Ottawa Bureau; +1 613-314-9647; email: firstname.lastname@example.org
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