The decision to file a project to sell bonds worth $500 million by the Road Conservation Fund (FOVIAL) in El Salvador was made due to the establishment of a high rate of 14.5% and the low demand from foreign investors. According to the Minister of Finance, Jerson Posada, the terms proposed by the broker were not considered favorable for the country, leading to the rejection of the transaction.
The situation has raised concerns about the investment climate in El Salvador. Salvadoran specialist in International Relations, Napoleón Campos, attributes the lack of trust from investors to the legal insecurity prevailing in the country, particularly due to recent violations of the Constitution by the government.
This rejection further complicates El Salvador’s position in obtaining international financing, especially when compared to other countries in the region. For example, Costa Rica recently placed international debt with an interest rate almost half of that required for FOVIAL bonds, indicating a stark contrast in investor interest and confidence.
Economists also point to the debt owed by the Salvadoran government to FOVIAL, which has significantly increased over time, potentially influencing the lack of demand for the bonds. Additionally, concerns have been raised about the structure and potential violations of the law in the way the funds were intended to be managed.
Ultimately, the unviable rate for FOVIAL, combined with existing debt obligations at much lower interest rates, made the 14.5% rate for the proposed bonds impractical. This has led to a complicated scenario for El Salvador in its quest for international financing.