Colombia to pursue Latin American investors for domestic debt

CARTAGENA, Colombia, Feb 6 (Reuters) - Colombia will seek Latin American investors for its domestic debt to diversify its range of bond holders and improve the liquidity and resilience of the debt market, a finance ministry official said on Thursday.

Over the last decade Latin America’s fourth-largest economy has mainly sold its bonds - its biggest source of financing after taxation - to investors in the United States and Europe, and to a lesser extent Canada and Asia.

Investment by international funds in Colombia’s domestic debt stood at 76 trillion pesos ($22.6 billion) at the end of 2019, equivalent to 26% of the total bonds issued.

Foreign investment is the second biggest holder of Colombia’s public debt, ranking behind pension funds but ahead of banks.

“We are going to work very hard on Latin America this year,” said Cesar Arias, the finance ministry’s director of public credit, at an economic conference in the Caribbean city of Cartagena.

“We have found opportunities in Chile and in Peru, where current circumstances in recent months mean there is an excess of liquidity and greater need of diversification,” Arias said, referring to social unrest in both countries.

A wave of social unrest across developing countries this year has caught many investors off-guard and is challenging models designed to gauge political risk for investors, prompting some to pull money out.

Arias said plans for this and next year include issuing 30-year bonds and creating an exchange traded fund (ETF) for domestic debt to attract smaller investors.

The ETF will be available to trade on the Colombian stock exchange.

Last year Brazil launched a similar fund worth $1 billion under a program developed with the World Bank, Arias said. (Reporting by Nelson Bocanegra; Writing by Oliver Griffin; Editing by Richard Chang)