Japan Bank for International Cooperation (JBIC) has signed a set of agreements to provide a guarantee for yen-denominated private placement of foreign bonds (Samurai bonds) totalling ¥30bn to be issued by the government of Uruguay.


JBIC will guarantee the principle and part of the interest, with Sumitomo Mitsui Banking Corporation (SMBC) taking part in the issuance as lead arranger, and Daiwa SMBC as documentation advisor.


To date, the government of Uruguay has issued yen-denominated foreign bonds four times in the Tokyo market. However, since its last issuance in March 2001, it had been difficult to issue the bond in the Tokyo market due to the decline in the credibility of Latin American countries which had been triggered by unfortunate occurrences such as the default of the sovereign bonds of Argentina.


Nevertheless, the credit enhancement achieved with JBIC’s provision of this guarantee has opened the way for the government of Uruguay to return to the Tokyo market.


The proceeds of the bonds will finance the infrastructure development pertaining to export of wood chip to Japan. Despite tight supply in the international market in recent years, the volume of wood chip exported from Uruguay to Japan has been increasing, and Uruguay has accordingly gained significance as a source of supply of this material.


JBIC’s provision of this guarantee is expected to boost infrastructure development related to wood chip exports, thereby contributing to stable supply and an increase in export volume of the material to Japan. It is also expected to strengthen ties between Japan and Uruguay, thereby invigorating their bilateral economic exchanges.


This is the third guarantee that JBIC provides for a bond issuer in Latin America. Supporting the yen-denominated bond issue by an overseas issuer on the Tokyo market, it is expected to help create business opportunities for Japanese financial institutions and invigorate the samurai bond market.