Cabei initiative underway to issue CentAm debt through Mexico

Central American development bank Cabei is studying the possibility of creating a regional capital market to facilitate the issue of Central American debt securities guaranteed by the bank itself.

Cabei CFO Hernán Alvarado said efforts are “already underway”, with ongoing discussions with Mexico’s finance ministry proposing that Central American nations can make sovereign issuances in Mexico. 

“Taking into account the effects of high costs in international markets through Eurobonds, the [Mexican] government has offered its contribution and its help to promote the participation of Central American countries as issuer in the local Mexican market,” said Alvarado. 

Speaking at a recent Cabei forum, Alvarado said Central American governments will be making the issuances as short-, medium- or long-term bonds, as needed

Alvarado said they are currently working to adjust regulatory norms in the respective territories to allow the issuances to take place, which “will be acquired in Mexican pesos, and through hedging and swap operations we’re going to transfer those Mexican pesos to dollars,” adding that the mechanism will represent an additional source of resources “that will be needed especially for 2021.”

He said it was important that the debt would have Cabei's guarantee, given its solid risk position, adding that Mexico provides a market that is “very liquid and very deep and with a broad investor base and, above all, at very competitive costs.”

Alvarado provided following graph during the presentation to outline the program. 

Source: Cabei/BCIE

Another proposal presented by Cabei is a credit program to support central bank liquidity management, built out of a US$1bn initiative created by the entity in 2008 to respond to the international financial crisis.

At the event, Cabei CEO Dante Mossi highlighted the role of the multilateral in mitigating the impacts of the pandemic through its COVID-19 emergency support, preparation and economic reactivation program for more than US$2.6bn. This is in addition to the US$2.5bn also provided to address the damage caused by hurricanes Eta and Iota.