The total interest that the country would pay for the US$2,750 million in bonds placed, throughout the life of both issues, would amount to about US$1,705.06 million. Of that amount, approximately US$575 million would correspond to the first tranche and US$1,130.06 million to the second. The annual payment would be US$164 million and the principal (US$2.75 billion) is amortized at the maturity of each bond.
Nevertheless, it was a successful placement. Although the average cost is around 6%, higher than that of issues carried out between 2013 and 2019 – when rates ranged between 4% and 5% – this mainly responds to an international environment of higher base rates, especially in United States Treasury bonds.
Therefore, the increase in cost is not so much due to a deterioration in country risk, but rather to the new global financial context.
The difference of just 0.40 percentage points between the rates applied to the two tranches (5.75% for eight years and 6.15% for 12.25 years) reveals that the market maintains confidence in the Dominican economy in the medium term.
Likewise, the differential between the rates of this issue and those of Treasury bonds—which currently stand between 4% and 4.5%—reflects a moderate risk premium, of between 150 and 220 basis points, depending on the tranche. This suggests a contained risk perception for an emerging issuer that does not yet have a full investment grade. In an environment of high global rates, placing 12-year debt below 6.5% is a positive sign.
Regarding demand, the issue was oversubscribed 2.6 times —US$7.2 billion compared to an offer of US$2.75 billion—, which shows confidence in macroeconomic stability, a perception of low relative risk and a context of high international liquidity in search of yield, among other favorable factors. A demand equivalent to 1.5 times what was issued would have been acceptable; twice, good; but by exceeding 2.5 times the offer, it can undoubtedly be classified as solid.
For the country to adequately assimilate the cost of this financing, it will be necessary to ensure nominal GDP growth in dollars above its potential rate.
To achieve this, it must prioritize projects with a high economic multiplier, accelerate investment in logistics and energy infrastructure, prevent resources from being diluted in unproductive current spending, and strengthen coordination between fiscal and monetary policies.
In addition, it is essential to maintain an adequate balance between debt in pesos and dollars, take advantage of periods of exchange stability to prepay or refinance obligations and deepen the debt market in local currency for longer terms. The greater the proportion of debt in local currency, the lower the exchange rate vulnerability.
With the implementation of these measures, the country could reduce and stabilize the relationship between debt and Gross Domestic Product (GDP), thus consolidating fiscal sustainability in the medium and long term.
