Income crisis pushes Colombian cities, provinces to seek market funding

(C) Reuters. Outbreak of the coronavirus disease (COVID-19) in Bogota

By Nelson Bocanegra

BOGOTA (Reuters) – After two months of coronavirus quarantine, Colombian cities and towns are bracing for tax income to dry up and venturing into the relatively unfamiliar territory of debt markets to seek funding.

As local governments fish for financing to sustain investment in everything from social programs to infrastructure, investors have been biting.

Capital city Bogota issued more than $150 million in 10 and 20-year paper on Thursday in a doubly over-subscribed operation.

“Bogota will probably be harder hit than the nation on average…that obviously means an income fall this year, an increase in spending,” said city finance secretary Juan Ramirez, predicting an income fall of some 1.3 trillion pesos ($344.4 million) and a contraction of city GDP of up to 8%.

Further bonds may be issued, he said.

Bogota also issued bonds last year, while Cundinamarca province issued paper in 2018.

Historically, councils of local and provincial governments have avoided issuing paper which comes due after governments leave office, analysts said.

The governor of Atlantico province – Elsa Noguera – has launched a 1 trillion peso economic reactivation plan and is willing to issue debt ahead of a predicted 25% income reduction.

“Indebtedness is necessary,” Noguera told Reuters. “Some resources we’ll have to look for abroad, it’s a reality that even if local banks have resources they are limited, so the capital market is going to be the alternative, like international multilateral banks, for provinces.”

Colombia’s second city Medellin is considering issuing debt, a stock exchange source told Reuters. The city did not respond to a request for comment.

Several local governments have been in touch with the stock exchange, exchange president Juan Pablo Cordoba told journalists.

“We’ve had conversations with some capital cities and some provinces and the idea is they follow the example of (Bogota),” he said.