Uruguay’s sustainable bond will target gas emissions and native forest preservation

Montevideo — The leadership of the Uruguayan government is in London, where the president Luis Lacalle Pou met on Monday with Prince Charles of Wales and British Prime Minister Boris Johnson. But, in addition, during the visit to the United Kingdom, the official delegation also exhibited the bond that Uruguay will issue tied to sustainability goals and pointed out that they seek advance with multilateral credit organizations to obtain benefits in loans in case of meeting environmental goals.

The Minister of Economy, Azucena Arbeleche, said this Monday that government officials already visited investors in New York and that this week they will visit London and Paris, as stated during a conference organized by Canning House.

Arbeleche affirmed that the sovereign bond, with rates indexed to sustainability goals, will be specifically tied to two climate actions. On the one hand, the reduction of Emissions of greenhouse gases and for other aspects related to the preservation of native forest. The minister added that this second point, which had not been taken into account at the beginning, was resolved after talks with some investors.

Lacalle Pou accompanied the leader of the economic team in the presentation where Foreign Minister Francisco Bustillo and Industry Minister Omar Paganini were also present. The Uruguayan president highlighted Uruguay’s commitment to caring for the environment and pointed out the relevance of advancing in “green finance”.

Bloomberg reported last week that the Sustainability-Linked Bond issuance is scheduled for the third quarter of this year. The bond will have a lower coupon if the goals are met and a higher coupon if they are not.

The Uruguayan Economy Minister said this Monday that the government has already carried out a similar approach to the multilateral credit organizations, to access lower interest rates on loans if they meet certain goals. The idea was handled by Arbeleche last year, which now intends to move forward.

“Is about include in the loans an interest in which you are also considered or have to pay less in relation to your environmental behavior. We are working on this with different regional and global multilateral institutions for Uruguay”, said the minister.

Arbeleche added that financing with a “sustainable approach” is a “great opportunity”and remarked that Uruguay has a challenging environmental agenda.

financing needs

The Uruguayan government revised upwards the financing needs for the year 2022, which are located at US$ 4,288 million, according to a report issued this Monday by the Debt Management Unit of the Ministry of Economy and Finance. The number represents US$153 million more than expected in the previous February report, when they were estimated at US$4,135 million.

The fiscal deficit represents 48% of borrowing needs, while amortizations represent 42% of the total, the official document said.

Regarding the sources of financing, the total issue of bonds was projected by the Uruguayan government at US$ 3,714 million. For its part, Loan disbursements with multilateral organizations were estimated at US$450 million during 2022.

Projected net government indebtedness (ENG) is US$1.95 billion, above the US$1,846 million previously estimated. The ENG, explained the Debt Unit, takes the issuance of market public debt securities and loans disbursed net of amortizations and accumulation of financial assets of the central government.

The Central government gross debt stock was estimated at 62% of nominal GDP, at the end of the first quarter of 2022. This marked an increase of 2.1 points of GDP compared to the end of the previous year. Estimated net debt remained stable at 55% of GDP.

The proportion of debt in local currency increased to 51.5%, an increase of more than four percentage points compared to the end of 2021, the report said.

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