By Rogerio Jelmayer
SAO PAULO--Brazil's Securities and Exchange Commission, CVM, the
equivalent of the SEC, on Friday authorized Inter-American
Development Bank to issue bonds in the local market.
According to CVM, the authorization will help IADB to obtain
funding in the local market, and to then finance projects linked to
the country's economic and social development.
The authorization also may pave the way for IADB to help in the
development of the local debt markets in Brazil, mainly the
secondary market, which suffers with low liquidity.
In recent years, the Brazilian government tried to develop the
secondary debt market using Brazil's National Development Bank, the
BNDES, to issue debentures, but it has so far met with little
success.
With Brazil's benchmark interest rate at 11% per year, asset
managers have opted to acquire government bonds instead of assuming
more risks by acquiring bonds from companies.
In the meantime, those companies that issue local bonds are the
ones with high grade, such as iron ore miner Vale. Banks and
pension funds tend to dominate the acquisition of those assets and
hold the bonds until maturity, blocking the development of the
secondary market.
Write to Rogerio Jelmayer at rogerio.jelmayer@wsj.com