On the occasion of a recent bond issue for G. 125,000 million in the local market, the Development Bank of Latin America and the Caribbean (CAF) considered agricultural and agroindustrial SMEs to be among the key productive sectors of the Paraguayan economy.
CADIEM The company's president, Elías Gelay, describes the conditions under which this stock market transaction was carried out and the impact it will have on the local economy.
The Development Bank of Latin America and the Caribbean (CAF) made a new incursion into the Asunción Stock Exchange (BVA) on April 14, through a bond issue for G. 125,000 million, with a five-year term and an interest rate of 6.65%. It was the third series of a global program of G. 546,150 million, of which G. 394,900 million have already been placed.
In this way, CAF consolidates its presence in our country as an active participant in the Paraguayan capital market, contributing to its maturation, and a vital promoter of Paraguay's diversification and inclusive economic growth.
The latter is reinforced by the fact that the resources raised with the aforementioned bond issue will be used mainly to finance small and medium-sized enterprises (SMEs) in the agricultural and agro-industrial sectors, with the objective of improving the competitiveness of these companies in key productive sectors of the Paraguayan economy, as explained by the entity.
This initiative also seeks to extend financing terms and develop the local financial market, providing SMEs with the necessary time horizon to make sustainable productive investments. CAF sees Paraguay at a positive moment in terms of its economic dynamism, with an important highlight in terms of productivity growth and financial inclusion.
On the recent bond issue
"The execution of the issuance program at this time is due to the need to provide long-term financing for SMEs, especially in strategic sectors such as agriculture and agribusiness. This is aligned with CAF's strategy to actively contribute to the maturation of the local capital market and support inclusive economic growth that benefits all Paraguayans," said CAF's representation in Paraguay.
CADIEM Casa de Bolsa, structuring and placement agent of CAF bonds, recognized this development bank for its contribution to the capital system and the Paraguayan economy, through the delivery of a commemorative plaque from the hands of the directors of the stock exchange entity. The ceremony took place on Tuesday, April 29, at CAF's headquarters.
Challenging financial context
CADIEM's president, Elías Gelay, explained that this issue of CAF bonds was found in the face of the challenging attractiveness that investment in dollars is still having. As it was an offer of securities in guaraníes at an interest rate of 6.65%, the yield of CAF bonds was close to that offered by instruments in dollars, he explained.
At this point, Gelay pointed out that CAF's credit quality made it possible to raise funds under better conditions, an important achievement considering that this financing cost will later be passed on to the interest rates at which SMEs access loans from local financial institutions.
"The rate was really challenging. As the dollar has been rising and investments in dollars still have a good rate of return, issuing and raising guaraníes at rates quite similar to those in dollars was a challenge. The financial context was challenging, but we were able to issue at these very favorable conditions, which benefit access to financing and credit conditions for this sector, which is so important for the country, such as SMEs", said the stock exchange executive.
A particular feature of CAF's recent bond issue is the one-year grace period for the payment of principal; thus, the principal payment will be made semi-annually, but the first payment will be in the 12th month. This means that, depending on the decision of the first-tier entity (probably a bank) that ends up granting the loan to the end client through this funding, the grace period obtained in the bond issue may also be transferred to the financing received by the SMEs through the program.
Interest will be paid semi-annually from the first payment. CAF's previous bond issues in the BVA were made in July 2023 and December 2024, for G. 72,400 million and G. 197,500 million, respectively, at terms of three and four years.
Significant economic impact of multilaterals on the stock market
The outlook regarding the presence of multilateral organizations in the BVA is not only auspicious for the local capital market and its various players, but also for the Paraguayan economy as a whole and sectors such as SMEs, so that they can access increasingly better financing conditions.
Elías Gelay recalled the hard work required to prepare the ground for the incursion of multilateral organizations in the Asunción Stock Exchange, since certain regulations of some local entities had to be adjusted and there was no previous experience in the country with this type of issuers. CADIEM is the exclusive placement agent for CAF and Inter-American Development Bank (IDB) securities, a task that will continue to be promoted by the entity.
"Multilateral organizations will continue issuing programs in local currency. This really helps several sectors of our economy, which sometimes do not have adequate financing conditions, to have access to much more favorable conditions, and therefore generate a very important economic and social impact", concluded CADIEM's president.
More about Development Bank of Latin America and the Caribbean (CAF)
CAF is a development bank focused on supporting the countries of Latin America and the Caribbean and improving the quality of life in the region through actions that promote sustainable development and regional integration. It serves the public and private sectors, providing multiple products and services to a broad client portfolio of 22 member countries, private companies and financial institutions.
Sites of interest:
CADIEM Casa de Bolsa
CADIEM Administradora de Fondos
Asunción Stock Exchange
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