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Government plans on issuing USD16.5 billion, in line with our call.
2024/01/05 | Andrés Pérez M., Vittorio Peretti & Ignacio Martinez Labra

The Ministry of Finance announced the 2024 gross debt issuance plan totaling USD16.5 billion, as we had anticipated. The planned amount is equivalent to the gross amount issued in 2023, according to our estimates yet slightly below the annual USD18 billion cap authorized by the 2024 Budget Law, suggesting that the debt issuance plan could eventually be revised up slightly and/or is likely to be complemented by financing from multilateral organizations such as the World Bank or the IADB. While the total gross issuance plan for 2024 is similar in size to the amount issued in 2023, the composition between net financing and amortizations is different. The 2024 issuance plan considers net financing needs for USD12.7 billion, above the USD9.7 billion from 2023, while the refinancing of maturing debt reaches USD3.8 billion, below the USD6.8 billion of 2023.


A higher share of local currency debt relative to foreign currency. Consistent with recent efforts to gradually reduce the share of foreign currency debt (estimated at 35.7% of the total in 2023), the Ministry of Finance surprised by increasing the planned gross flow of debt to 90%, up from our estimate of 81.6% in 2023. Of the roughly USD14.9 billion to be issued in local currency in 2024 (USD13.5 billion in 2023), about USD2.5 billion are planned to be in notes maturing after 2024, which should increase the already sizable maturities of 2025 (USD10.3 billion). Importantly, the MoF may issue notes in 2024 that mature in the same calendar year, which would not be considered as part of the annual issuance plan, much like the USD3 billion equivalent in nominal notes issued in February 2022 that matured in August of 2023. Of the remaining USD12.4 billion in local currency, roughly 52% is planned to be issued in nominal bonds and 48% in inflation-linked bonds, which would be issued either through the Central Bank’s auction system or through a book-building process with direct participation of non-residents. More information on the local currency maturities should be available along with the 1Q24 schedule through the Central Bank’s auction system, acting as Fiscal Agent. As we have highlighted in previous notes, low liquid balances at the Treasury should lead the MoF to issue bonds in foreign currency during the second half of January, and in local currency through the Central Bank’s auction system as soon as February or even earlier (depending on the approval of the lengthy official administrative processes).


Dollar sales still to range between USD8-10 billion in 2024. We estimate the MoF’s dollar sales in 2024 to range between USD8-10 billion (down from USD12.2 billion in 2023), sourced from USD5 billion in dollar-denominated mining revenue (Codelco and private mining), USD1.7 billion in foreign currency denominated debt, our estimate of roughly USD1.5 billion in dollar inflows from local currency debt sold to offshores in primary issuances, loans from multilaterals, and other sources. Low dollar balances by the end of 2023 suggest the Treasury is unlikely to sell sizable amounts during the first few weeks of January, at least until they issue foreign currency denominated debt (which we expect during the second half of January).


Local currency exchange and buybacks to continue this year. As we had anticipated, the MoF plans on continuing the buyback and exchange of local currency bonds that was announced in 3Q23. We expect these LM programs to be focused on debt maturing in 2025 and 2026, as well as smaller outstanding amounts in illiquid bonds. According to the MoF, during 2023 these LM programs totaled USD1.7 billion, concentrated mainly in bonds maturing in 2025 (USD287 million) and 2026 (USD1.1 billion). In our view, even though the MoF is expected to issue notes in local currency totaling USD2.5 billion that mature after 2024, that is, likely in 2025, we believe they will focus the LM efforts in 2025 and 2026 considering the maturity wall of USD10.3 billion, and USD12.7 billion, respectively.