LatinFinance - January/February 2017 - 24

market with maturities beyond 18-to-24
months," Tenaglia says. "To do this we
need to have inflation-adjusted debt instruments."
Charting a new course
Alejandra Naughton, chief financial officer
at the local financial services firm Grupo Supervielle, says the tax amnesty is the "first
of many steps" to create a new asset class.
"If Argentina can continue to normalize its
economy, you just might be able to make
people save their money locally, and the tax
amnesty is a very good step to attract savings back," she says.

ALEJO COSTA, PUENTE

"IT'S ABOUT
INCREASING
FUNDING ON THE
EQUITY SIDE FOR
LOCAL PLAYERS,
PROVIDING CLEAN
MONEY IN THE LOCAL
MARKETS"

Argentina's credit market represents just
14% of GDP. That leaves huge potential for
growth when compared to its neighbors:
Chile's credit market is 70% of GDP, while
Brazil's is 45%, Redrado says.
"The amnesty is like a jumpstart for
Argentina into a new pattern of development," he says.
It does not take a "rocket scientist" to see
Argentina's credit market expanding, but a
lack of direction from the central bank has
held things back, he says.
"You need an economy that gives you
a planning horizon," he says. "As things
stand, we don't know where interest rates

Colombia growing
In Colombia, according to José Andrés Riveros, fixed income senior
analyst at Credicorp Capital, the size of the average bond sale has tripled
in the past decade. Ten years ago, Riveros says, the standard local issue
stood around $30 million equivalent. Five years ago, it rose to roughly
$50 million apiece. Nowadays, it is worth approximately $100 million
each.
In comparison, he says, cross-border bond sales by Colombian issuers
have also increased in size in the past 10 years but not at the same rate.
They have grown steadily in size from an average of $300 million in 1996
to $400 million in 2001 and $500 million today.
"You can't issue really large bonds in the local market, but it's still a big

Abandoning the security blanket
Allocations to government debt by Colombia's high-risk pension
fund portfolios (% of total assets)
60
50
40
30
20
10
0

2010

2011

2012

2013

2014

2015

2016

Source: Superfinanciera.gov.co

market," Riveros says.
Colombia's bond market still has room to grow. According to the latest
figures from the Bogotá stock exchange, BVC, corporate issues comprised just 10.5% of fixed income trading in November, moving around
600 billion pesos ($202 million) during the month. Some 28.6 trillion

24 L ATINFINA NCE.COM - January/February 2017

pesos worth of Colombian Treasury bonds changed hands in the same
period, BVC says.
The local bond market is plenty liquid, and various factors, such as a
less volatile exchange rate and lower financing costs, could entice more
issuers to enter the fray, Riveros says. "In terms of liquidity and pricing,
the local market is accessible," he says.
Colombia's corporate bond issuers pay a spread anywhere between
150 basis points and 200 basis points in the cross-border markets. At
home, however, they pay no more than 60 basis points, and some of the
stronger, investment-grade issuers can price their notes level or even
below the sovereign, he says.
Six years ago, Colombia's pension funds, known as AFPs, allocated
49% of their portfolios to local government, just shy of the legal limit of
50%. Since then, the AFPs have diversified, buying more corporate bonds,
which has driven down the cost of capital for local issuers. Colombian
government bonds now account for roughly 31% of the AFPs' fixed
income portfolios, Riveros explains.
Around 90% of local corporate issuers enjoy AAA ratings, while 8%
are AA+. Only 2% are AA or less, but, as the market evolves, it will open up
to more issuers that stand lower on the ratings scale, Riveros says. In the
meantime, investment-grade issuers have filled the gap with larger transactions. Some AAA corporates have registered bonds sales for more than
300 billion pesos, while a transaction for 500 billion pesos is expected to
come to market in the first quarter of 2017.
Grupo Aval sold 300 billion pesos in local bonds in late November.
It printed a 10-year note at 386 basis points over the consumer price
index, or IPC, and a 20-year note at 415 basis points over the IPC. Orders
reached 650 billion pesos, which allowed Aval to pull in the spreads from
a maximum of 415 basis points on the 2026 notes and 450 basis points
on the 2036 notes. The deal led Aval's chief executive officer Luis Carlos
Sarmiento to herald the "maturity of the Colombian capital markets".
Colombia's largest bank, Bancolombia, followed suit in December,
when it issued a 350 billion peso green bond in the local market. The
seven-year notes, acquired entirely by the International Finance Corporation (IFC), were priced at 220 basis points over the interbank lending rate.
Energy company Isagén, acquired by Canadian investor Brookfield Asset
Management in early 2016, raised 300 billion from a two-part local bond
sale in September.

http://Superfinanciera.gov.co http://www.LATINFINANCE.COM

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