(CORRECTS to remove amount in graf 1, fixes quote in graf 3)
By Nic Stone
NEW YORK, Oct 20 (IFR) - Chile could return to the US dollar bond market as soon as this year, Finance Minister Rodrigo Valdes told reporters on Thursday.
The government has pledged to cut rising deficits, but has also signaled its intention to issue as much as US$10.5bn in both the local and international markets next year.
“We will issue next year for sure,” Valdes said at a press event. “We might even issue this year, if the markets behave okay.”
The government plans to finance the growing deficit through more debt sales, pushing central government debt to 25.5% of GDP next year - its highest level in more than two decades, according to Moody’s.
Chile, rated Aa3/AA-/A+, has been hit by weaker commodity prices, particularly copper, of which it is the world’s largest exporter.
Valdes, who has been finance minister since May 2015, is making efforts to contain the widening fiscal deficit, which the government expects to hit 3.2% of GDP this year, up from initial forecasts of 2.9%.
GDP growth is expected to slow to 1.75% in 2016, according to the government, its weakest expansion since the 2009 recession. Next year growth is tipped to hit 2.25%.
Chile, which remains the highest rated country in Latin America, has seen US Treasury spreads on its US$1.35bn 3.125% 2026 bond shrink to 87.9bp from 130bp when the bond was issued in January.
At the time, the country also issued EUR1.2bn of 1.75% 2026s through Bank of America Merrill Lynch, Citigroup, HSBC and Santander. (Reporting by Nic Stone; Editing by Paul Kilby and Davide Scigliuzzo)