Exclusive-Brazil plans up to $735 million panda bond issuance, says finance minister
By Joe Cash
BEIJING, June 25 (Reuters) – Brazil plans to raise up to 5 billion yuan ($735 million) with its first-ever issuance of panda bonds, Finance Minister Dario Durigan told Reuters on Thursday, marking the largest debut of yuan-denominated debt by a foreign nation in China.
The Latin American country will become the fifth sovereign issuer in 12 months to tap into China’s domestic debt market, with the move seen as a “test” to help private Brazilian firms deepen their presence in the country, Durigan said.
The size of the issuance has not been previously reported.
Though still nascent, so-called panda bonds are a key part of Beijing’s effort to internationalise the yuan – which still faces tight capital and regulatory controls – and offer emerging markets a low-risk, low-cost way to signal political openness to alternatives to the dollar-dominated global financial system.
“We need to test and to start doing the trajectory of sovereign debt of Brazil in China,” Durigan said in an interview following a meeting with China’s central bank governor, Pan Gongsheng, in Beijing to finalise the plan. He said he hoped the bonds would be issued within the next two to three months.
“We raised 5 billion euros in Europe. We haven’t defined the amount here in China for the first issuance, but it will be up to 5 billion as well,” he added, though he was referring to the yuan.
Brazilian firms had asked the government to begin issuing yuan-denominated debt to help them raise funds through private panda bond deals and to ease foreign exchange volatility in Brazil, Durigan said.
“The profitability of projects (in Brazil) are very good, but the volatility of the rates of the (Brazilian real) may affect the final result, so we are providing a hedge currency resource for these investments,” he added.
($1 = 6.8028 Chinese yuan renminbi)
(Reporting by Joe Cash; Editing by Muralikumar Anantharaman and Thomas Derpinghaus)