Political Risk Latin America Blog @PolRiskLatam

Peru a worthy borrower of ultra-long debt

Posted in News and Articles, Political Risk by politicalrisklatam on November 12, 2010

by Reuters, November 11th, 2010.

Peru is a worthy borrower of very long-term debt. While poorer than Mexico or Goldman Sachs — two others recently in the market with long-dated bond issues — the Andean nation’s economy is more balanced, it has less debt and its growth prospects look better. Global mining companies already take the country seriously; its successful $2.5 billion financing this week suggests debt investors are coming to do so too.

Mexico recently sold 100-year debt at a 6.1 percent yield, while Goldman sold 50-year paper at 6.125 percent. In its fundraising, Peru’s long-term slug had a maturity of “only” 40 years, but it is still notable that the $1 billion issue sold at a lower yield than paid by Mexico or Goldman — 5.875 percent.

At first sight that seems irrational. Peru’s GDP was just $127 billion in 2009 according to the World Bank, only one-eighth of Mexico’s, and it is significantly poorer on a per capita basis too. As a company Goldman isn’t directly comparable, but for illustration its $45 billion of revenue in 2009 translates into an amount per employee that dwarfs either South American economy. The investment bank’s credit ratings also trump those of Mexico and Peru.(continue reading… )

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