LatAm News El Salvador

Bancoagrícola's Vice President of Finance, Alexander Pinilla, affirmed that the liquidity of the Salvadoran financial system remained positive in the first half of 2022. In this sense, Pinilla said that deposits in the Salvadoran financial system would continue to grow in the second half of 2022; however, he indicated that the growth rate of deposits would slow down. In this context, in the second quarter of 2022, Bancoagrícola's total deposits increased to USD 16.5 billion, while loans reached USD 15.5 billion.

Argentina's Minister of Economy, Sergio Massa, managed to close his first month in office with a debt placement of ARS 212,236 million. On Monday, in the second tender of August, the Secretary of Finance offered a bid for four securities maturing in 2022 and 2023. In this tender, the Treasury issued a Liquidity Bill (LELITE) maturing on September 30th, 2022; in addition, two discount bills (LEDE) maturing on December 16th, 2022, and January 31th, 2023, and an inflation-adjusted bill (CER) maturing on June 16th, 2023.

On Tuesday, Bolivia's President Luis Arce announced that he had approved the acquisition of USD 1,142 million in debt. According to studies, the country's external and internal indebtedness is currently at least 78.8% of the Gross Domestic Product (GDP). In detail, about 12 decrees were authorized by the Bolivian government to acquire debt contracts with the CAF, IDB, Fonplata, ICO, Eximba, KfW, and IFAD; to boost employment, health, water and sanitation, irrigation, climate change, roads, and energy projects, and to strengthen the State's statistical system and other public investment projects.

Costa Rica Report highlights

Although one of the "leitmotifs" of former President Alvarado Quesada was to leave the "house in order," this has been questioned by various political sectors, including the new President and economist, Rodrigo Chaves.

Administration of Rodrigo Chaves announced on June 22nd, 2022, the modification of the fiscal rule. This occurred after the National Child Welfare Agency (PANI) authorities raised alerts due to the restrictions to urgently allocate resources to private organizations that care for vulnerable minors since they denounced that they would run out of money to operate after June 30th.

On Monday, the Presidents of the nations that make up the Andean Community (CAN) - Colombia, Ecuador, Peru, and Bolivia - said they would like Venezuela, Chile, and Argentina to join the group. "If we manage to integrate Chile, Venezuela, and Argentina... I think this would change things significantly, and our voice would be heard more clearly on the world stage," said the Colombian President, Gustavo Petro. "I would like to express how important it would be for the Andean Community, and the benefits for its members, for Chile and Venezuela to rejoin," said the Peruvian President, Pedro Castillo.

The preparation of the General State Budget for 2023 will begin in September, and the Ministry of Finance already has a few starting points. One of them is the price of oil, one of the primary sources of income for the State's budget. According to the International Monetary Fund (IMF), the price of Ecuadorian oil will average USD 75.3 per barrel in 2023. With that price, the budget's oil revenues would fall by around USD 500 million compared to 2022, warned the former Minister of Finance, Fausto Ortiz.

Negotiations in the securities market reported an increase of 66.4% in 2023 with a traded amount that reached $4,817.4 million, according to the Superintendence of the Financial System (SSF).

The last bulletin published by the institution indicates that the repo market had one of the highest increases between 2022 and 2023, going from $1,049.5 million to $1,917.7 million, with an increase of 82.7%.

This was followed by the primary fixed and variable income sector, which went from $848.6 million in 2022 to $1,520.3 million for 2023, equivalent to a growth of 79.2%.

The SSF assures that both the secondary and stock markets reported a 25.7% and 36.4% decrease in the amounts traded in the last year.
A record.
The executive director of the El Salvador Stock Exchange (BVES), Valentín Arrieta, described 2023 as a record year for the stock market. The dynamism was linked, in part, to the upward trend of the primary market, investment certificates, securitization and closed-end investment funds.

The BVES spokesman recalled that the securitization figure dates back more than 13 years, and since then more than $2,000 million have been placed in the primary market through this tool. Last year alone, more than $243 million were placed in this sector, led by vertical projects, shopping centers and corporate developments.

Sources: El Mundo

El Salvador Report highlights

The failed negotiations with the International Monetary Fund (IMF) and the collapse of BTC prices in the midst of what is called a new "crypto-winter" have configured a significantly complex scenario. In this context, the government has decided to repurchase its sovereign bonds maturing between 2023 and 2025 to alleviate the payment landscape.

Although the outlook does not look promising, at the end of July, Nayib Bukele affirmed that his government has the necessary liquidity to face the country's maturities and, in this sense, sent two proposals to the Legislative Assembly to repurchase the country's debt until 2025.

The price of the basic food basket (CBA) dropped just $0.31 last January in the urban area, confirmed the National Statistics and Census Office (Onec).

The latest update of the CBA highlights that the urban food basket closed at $256.74 last January, 0.12 % lower than the $257.06 reported in December 2023. Last month's value is however $11.71 higher than the cost recorded in January 2023.

In the rural area, the reduction was more significant at $0.96 in January and closed at $185.11. In addition, the cost of the food basket in this region showed a decrease of $0.14 compared to the same month of 2023.
What went down?
The food basket is made up of a group of foods considered basic for the maintenance of a person. It is calculated from the cost of French bread rations, tortillas, meats, rice, fats, fats, eggs, fruits, vegetables, beans, sugar and cooking (propane gas or energy).

For families in the urban area, Onec reports that last January the cost of French bread ration showed a reduction from $0.17 to $0.16 in the urban area, as well as tortillas went from $0.25 to $0.24.

Meanwhile, the vegetable ration went from $0.25 to $0.26.

In the rural area, there was a decrease in the rice ration, which went from $0.06 to $0.05. There was also a reduction in fluid milk from $0.034 to $0.032. Meanwhile, fats increased from $0.04 to $0.05.

Source: El Mundo

Salvadoran coffee conquered South Korea, and thanks to its quality, recently the company Foosung Corporation, returned to the country to acquire more of the aromatic and expand its network of suppliers in the territory.

The visit of the company was coordinated by the Ministry of Foreign Affairs, through the Embassy of El Salvador in South Korea, in conjunction with the Salvadoran Coffee Institute (ISC), entities that were responsible for scheduling an agenda for the envoys to meet local entrepreneurs in the field, as well as various producing regions.

In this regard, the Foreign Ministry reported that Foosung representatives toured farms located in the departments of La Libertad, Sonsonate, Ahuachapán, Chalatenango, Santa Ana and Usulután, in order to present the varieties offered by each of these areas, as well as to establish contacts with national coffee growers, with whom they addressed issues such as origins, processes and production chains, quality of grain and availability, among other points of interest.

Source: Diario El Salvador

The Legislative Assembly approved in its plenary session last Friday new debt for $193 million; and received three initiatives from the Ministry of Finance to approve another three loans totaling $226 million.

The three loans to be contracted will be acquired with: Andean Development Corporation (CAF), for $68 million; with the Saudi Fund for Development, for $83 million; and again with CAF, for $75 million. The three loans total $226 million in new debt.

The purpose of the loans will be as follows: the $68 million loan with CAF will be used to finance the "Program for the Strengthening of Public Spaces for the Sustainability of Security and the Recovery of the Social Fabric in El Salvador", which includes "strengthening public spaces in strategic areas of the country, such as the Historic Center of San Salvador".

The other CAF loan, for $75 million, will be used for the "Environmental Improvement, Drinking Water and Sanitation Program in the Upper Lempa River Basin (Trifinio) and Puerto de La Libertad, in El Salvador," aimed at water resource sustainability through forest restoration interventions.

Sources: El Economista

Between April and December 2023, the Government of El Salvador increased its debt to the Pension Fund by USD 1,097.76 million, with an additional USD 89 million in the last month of the year alone. Economist Carlos Argueta warns that this amount is more than double what was borrowed before the pension reform approved in December 2022, threatening the sustainability of the pension fund. The 30% increase in pensions since the reform does not fully explain this acceleration, raising concerns about the social security of future generations.

Economist Tatiana Marroquín points out that if the government continues withdrawing from the fund at this rate, it will deplete the fund quickly, as current contributions amount to around USD 700 million annually. The lack of updated information on pensions since April 2023 from the Superintendence of the Financial System hinders assessing the fund's sustainability.

The analysis indicates that the fund's estimated USD15,000 million in assets is reduced to approximately USD 5,500 million, and with annual withdrawals of USD 1,100 million, questions arise about the fund's longevity. Experts also question the destination of the money and its potential impact on the sustainability of the pension system. The pension debt also contributes to the total debt reaching a risky 87.7% of the GDP, affecting the attractiveness for foreign direct investment, a challenge faced by the current administration.

The Salvadoran government announced on Wednesday that it would buy the bonds maturing in 2023 and 2025 in advance to alleviate pressures on the risk of debt default over the next three years. After the announcement, the President, Nayib Bukele, pointed out that "it will be a transparent, public, and voluntary purchase offer to all holders of sovereign debt bonds from 2023 to 2025, at the market price at the time of each transaction." In this sense, the bond repurchasing operation will begin in six weeks, corresponding to the time it takes to prepare the procedures. In detail, El Salvador owes around USD 7,000 million in bonds in the international market, the closest maturity of which is in 2023 for USD 800 million and 2025 for USD 800 million.

In this context, the Minister of Finance, Alejandro Zelaya, supported the restructuring process for the debt of USD 1,600 million and pointed out, "we configured the first step for the beginning of our liability management strategy." To finance the operation, the country's Legislative Assembly approved that the Central Reserve Bank (BCR) transfer to the Ministry of Finance the Special Drawing Rights (SDR) for 275 million assigned by the International Monetary Fund (IMF) to El Salvador in 2021.

Source: El Mundo

El Salvador Report highlights

The uncertainty regarding the issuance of the "Bitcoin Bond," the persistent deterioration of the fiscal situation, as well as the international community's questioning of the integrity of the rule of law in El Salvador, have resulted in the sustained increase in the country's risk, and the associated cost for the Bukele Administration to access financing in international markets with it.

Due to the absence of measures to close the gap in the public deficit, and since El Salvador is returning to its growth trend, its financing needs will increase, and according to International Monetary Fund's (IMF) estimates, it will reach 20.3% of the GDP by 2025. In this sense, El Salvador requires short-term budgetary financing sources to sustain the growth rate.

With 65 votes in favor, El Salvador's National Assembly approved a decree which authorizes the Ministry of Finance to subscribe a loan with the Central American Bank for Economic Integration (CABEI) for USD 200 million to be used to attend "transfers," "obligations," and "strategic priorities of the government." Within the recitals of the decree, it is promised that the resources obtained from the CABEI correspond to "the disbursements that the government has made or the income that it has ceased or will cease to receive, due to the implementation of the measures related" to the fuel price subsidy. Thus, President Nayib Bukele presented this credit authorization decree as part of a government strategy to "secure the funds" that will allow it to "make an offer" to the holders of the Salvadoran bonds from 2023 to 2025. "Today's initiative is a message of order, confidence, and future. They count on us; we have supported and will continue to support you," expressed Luis Rodríguez, CABEI's Director for El Salvador. According to the Treasury, the State's income has been affected by the suspension of several fuel charges, including Value Added Tax (VAT). "The fiscal sacrifice caused by the lack of collection of the funds above requires the realization of efforts so that the resources may be reinstated," states the fourth recital of the approved decree.

Source: El Mundo

El Salvador

El Salvador's banking sector assures that the country's financial liquidity remained positive in June

Argentina

Argentina's Ministry of Economy raises ARS 286,000 million in the local debt market

Bolivia

Arce authorizes USD 1,142 million in new foreign debt

Venezuela

Countries of the Andean Community press for Venezuela, Chile, and Argentina to join the bloc

Ecuador

The IMF suggests a price of USD 75 per barrel of oil for Ecuador's 2023 proforma budget

Weekly Review

Newsletters

El Salvador's stock market grew 66 % at the end of 2023

The food basket decreased by only $0.31 in January in the urban area.

Korean company returns to the country in search of more coffee from El Salvador

Government of El Salvador requests guarantee for three $226 million loans

El Salvador

Government took USD 1.1 billion from pension fund in 2023 alone

Newsletters

El Salvador's government announces the early purchase of 2023 and 2025 bonds, denying the risk of default

Ministry of Finance to negotiate USD 200 million with CABEI

Moody's: Government will need multilateral agencies to repay the 2025 bond

El Salvador enters the list of autocratic countries in the 2022 Democracy Report

El Salvador

El Salvador is already a CAF member

El Salvador

El Salvador's tax collection in June was the lowest of the year

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