Costa Rica launches new 31-year term Eurobonds


In the financial sphere, the issuance of Eurobonds has become a key tool for countries seeking to access international capital markets and secure long-term financing. Costa Rica’s recent announcement of the initiation of a new series of $1.5 billion Eurobonds, with a 31-year horizon to maturity in 2054, is a clear sign of the country’s ambitions to strengthen its financial infrastructure and meet its long-term fiscal objectives.

At Clare Facio Legal, we recognize that this step forward in the country’s financial strategy not only demonstrates the confidence of international markets in the Costa Rican economy, but also sets a precedent for the government’s debt management and financial planning. As firm believers in Costa Rica’s potential and as advocates of economic development through smart investment, we are positioned to analyze and discuss the impact and implications of this financial move for market players and the economy at large.

With an expert look at the economic and legal context, in the following exploration, Clare Facio Legal will detail how this milestone fits into a broader financial development strategy and how it can serve as a catalyst for future investment and sustainable growth in the country.

Costa Rica launches $1.5 billion in Eurobonds in the market.

Costa Rica’s recent move in the international markets, with the issuance of $1.5 billion Eurobonds, is a reflection of a carefully calibrated financial strategy that seeks to optimize the country’s debt profile and secure resources for long-term development projects. This issue, which matures in 2054, is distinguished by its long maturity, which allows for a long-range financing vision and a sign of confidence in the country’s financial and economic institutions.

The amortization structure of the bonds, with equitable payments scheduled for the years 2052, 2053 and 2054, and an interest rate of approximately 8%, reflects a financial planning that seeks to balance fiscal burdens over time, avoiding excessive pressures on public finances at any specific point in the time horizon. This rate, in the current market context, is considered competitive and reflects a balance between the cost of borrowing and attracting investors.

Support from the Legislature to place up to $5 billion in debt over a 3-year term.

This effort is part of a broader plan, endorsed by the Legislative Assembly, which authorizes the placement of up to $5 billion over three years, demonstrating a structured, long-term financing strategy aligned with the country’s fiscal and development objectives. The fact that this is the second issuance for a similar amount this year underscores Costa Rica’s ability to access external financing on favorable and sustainable terms.

At Clare Facio Legal, we believe that current debt management and financing operations are indicative of long-term government management. In this context, we offer our knowledge and experience to advise our clients, both local and international, in understanding and taking advantage of the opportunities that these financial events present.

Our finance and commercial law practice and multi-language capability uniquely positions us to provide expert guidance in navigating the debt markets, investing in sovereign bonds and assessing the legal and tax implications of these financial transactions.

These types of financial operations not only capture the attention of investors because of the potential for return, but they are also a barometer of a country’s economic health and its ability to meet its long-term obligations. Therefore, the analysis of these movements becomes an essential component for any entity interested in Costa Rica’s financial dynamics.

Costa Rica’s issuance of Eurobonds is not only a sign of confidence and stability, but also serves as a call to action for those seeking to participate in the country’s economic growth.

At Clare Facio Legal, we are ready to assist investors in interpreting these developments and executing investment strategies that align with this new and auspicious financial environment.

What is a Eurobond?

Eurobonds, in the Costa Rican context, are external debt instruments issued by the Ministry of Finance for the purpose of raising funds from international creditors. This type of debt allows the Costa Rican government to borrow in global markets, generally on more favorable terms than those it would find locally. The need to resort to Eurobonds arises in order to diversify the sources of loans and find more competitive interest rates than those available domestically.

In Costa Rica, these bonds are usually contracted in dollars and offer a specific amount of money, along with an interest rate and a defined term for repayment. They are known as Eurobonds because they were originally implemented in Europe, and although the name may suggest so, they are not necessarily issued in Euros. Traditionally, these bonds have paid semi-annual interest to their holders.

The Costa Rican government has turned to this financing mechanism in order to service and restructure its domestic debt. Faced with higher domestic interest rates, Eurobonds present a lower interest debt option, allowing the government to manage its debt burden more efficiently and free up resources to reduce the fiscal deficit and finance public expenditures without competing with the private sector for local financing, which could raise domestic interest rates.

To conclude on the recent initiation of Costa Rica’s Eurobond issuance, we can affirm that this move is a tangible demonstration of the confidence that the international market has in the country’s stability and economic prospects. The issuance of a new series of Eurobonds for $1.5 billion, with a term of 31 years and maturing in 2054, reflects a strategic effort by the Ministry of Finance to optimize the country’s debt profile and to efficiently finance budgetary and public investment needs.

These operations, which include three equal amortizations in the last three years of the bond and an interest rate of approximately 8%, are in line with the plan approved by the Legislative Assembly, which contemplates the placement of up to $5 billion in a three-year term. This is a positive indicator of the financial management and long-term planning being carried out by the government, which undoubtedly contributes to a solid image of Costa Rica in the international financial markets.

At Clare Facio Legal, we understand the importance of these developments for our clients and the impact they have on investment and financing decisions. With a focus on providing specialized legal advice, we are prepared to guide investors and financial entities through the complexities of the Costa Rican capital markets, taking advantage of the opportunities that arise from these financial dynamics to maximize their results and consolidate their presence in the country’s economic environment.

Image of the first Eurobond placed on March 27, 2023.

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