This report is not to be published nor rna y it be quot~d ~_~ representing the Bank· s views.

No. E 166

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

THE EXTERNAL DEBT OF PARAGUAY

Economic Department Prepared by: James J. Lynch

June 30, 1951

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wb350881Typewritten Text67091

Tabl~ of Content~

1. Description of Present External De".Jt Outstanding 1

II. Service Payments on the External Debt 2

Table A-I:

Table A-2:

A-3

External Debt of Paraguay

Estimated Interest and ~mortization Payments on the External Debt of Paraguay

Summary History of the External Debts of Paraguay

THE EXTElliIAL DEBT OF PARAGUAY

1. Descri~tion of Present ~xternal Debt Outstanding

At the beginl'i.inG of 1951 the total external debt of Paraguay \'1as estimated to be equivalent to ap~roxiFately $12.4 million. Of this amount 75». or $9.4 million, is payable in U.S. dollars and of the remainder US$1.4 million is ex-pressed in Argentine pesos, US$l.l million in sterling and US$497,OOO in various other currencies.

Of the dollar debt of ~9.4 million, $3 million is due the :Sxport-Im:Gort Bank on hm loans, one of ;;3.4 million authorized on Jur.e 1, 1939, and the other one 0: $3 million authorized on Hay 18. 1942. Both ,·:ere for h1gb-lay construction. Of the total ~6.4 million originally authorized, $6 million \'fas utilized and the remainder ,·ras cancelled. The second major dollar obligation is the Port Concession Corp. 5;0 loan of $2.2 million. It originated from a contract betHeen the Para~~yan Government and a United States construction company for the constructio~ equipment and operation of the Port of .~.suncion.

The dollar debt includes a loan from the 3ank of Brazil, the 4~;~ 1942-1957, originally amounting to 100 million cruzeiros, nO\1 outstanding 1n the amount of 67.9 million cruzeiros, equivalent to Us:;i3. 7 million. This loan is repayarJle in dollars.

The remainder of the dollar obligations is the un:;?aid dollar :?ortion resu1 ting from the purchase of ut ility :?ro:~erties by the Paraguayan Government from private Argentine investors; the oris-in?,l [2.mounts being $3 million. 9 million ~rgentine pesos and 14,972,000 guaranies.

The Argentine debt of 7 million pesos, equivalent to $1.4 million, is made up of the equivalent of LJS$0.2 million - the remainin,,; Argentine :.J6SO :1aY-ments on the yUrCflase of the utilities referreci to above, and the equivalent of US$1.2 million, a loan from the .1.rgentine Central Bank, the 3-3/4s of 1947-1956.

The sterling debt no'.'! outstanding in the amount of i:rJ9J, 000, equivalent to uSGl.l million, represents the remainder of the three old 3~ issues matur:'ng in 1959. TIl.ese securities 1:rere issued as 8/~ bonds in 1871 and 1872, and as a 5~5 bond in 1915. They \1ere the only Pa:!"aguayan bonds ::Jublicly-offered abroac,. Service ?ayments on all three loans h~ve been irreGular and various debt adjust-ment ulans l"k'we been entereci into, ':1hieh finally reduced the interest to the

~ /

present rate of J,).

':LIhere rer:J.ains also about ip497,OOO due in various currencies to miscel-laneous creditors, the details of uhich are not readily available.

. .. / ...

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Listed below are the total amounts in each category. For details of the loans making u1' these totals, see Tables A-I and ·'\.-3·

External Debt of ParagRay

Amount Outst~~aing In currency Expressed

Date of pay It inU.S.$

U.S. Dollar Debt Export-Import Bank 4%. 1939/42-1958 4/30/51

4 Asuncion Port Concession Corp. 5~, 1941-1971 12/31/50

Brazilian loan 4%, 1942-59 12/31/50 Dollar payments due on purchase of

utilities 12/31/50 Total dollar debt . . . . . . Total sterling debt 12/31/50 ;, Total Argentine Peso debt 12/31/50 l' Niscellaneous Creditors 12/31/49 TOTAL D:E:BT . . . . . . . . . . . . . ~: Conversions "lere made at the folloi'ring rates:

~l = $2.80; p 1 = $ .20 II. Service Payments on the External Debt

(in thousands)

3,005 3.005

2,228 2.228 3.658 3,658

500 ,00 . . . 9,391 393 1,100

7,000 1,400 11 422

12,388

Service payments in 1951 are estimated at $3.5 million, with amortization $3 million and interest $500,000. The 1951 payment is substantially higher than the following years due mainly to arrears on the Export-Import Bank loans and final payment for the public utilities taken over by the Paraguayan Government.

The year of 1952 is a more representative year in which to analyze the external debt payments, "Thieh Nill then amount to the equivalent of $2 million, "lith amortization accounting for $1.6 million and interest $400,000. The major portion of these payments amounting to $1.6 million is due in dollars; 6529,000 on the E:rlJort-Im1'ort Bank loa,ns, $865,000 on the Brazilian loan and $177,000 on other dollar debts.

Service charges due on the Bank of 3razil loan are being deposited in guaranies at the Asuncion Branch of the Bank of Brazil. Because of lack of dollar e:l:change, hOt'lever, the conversion of these de'Josits in dollars is in arrears.

Argentine peso debt payments are equiv:::>,lent to US$238 , 000 and payments on old sterlin,,; bonds are equivalent to US$147,OOO in 1952 .

. 1I Origina.l currene;:r a.mounts n0t lrno1rm.

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Total service payments decline gradually (about the equivalent of US$200,OOO per year) to 1956 when they amount to $1,2.54,000. They then drop sharplY to the equivalent of US$684,000 in 1957 1:lhen both the Argentine peso debt and the Bank of BraZil loan are scheduled to be completely paid off. In the fol101rling year service payments are estimated to be dovm to the equivalent of $37.5,000 and by 1959 they reach a level of the equivalent of $177,000 remaining there through 1971. A final payment of $59,000 is due in 1972.

Listed belo,\., are the total debts and required interest and amortization payments along with payments by type of currency. (For additional details see Table A-2) .

• Estimated Interest and Amorti~ation

Pa;anents on the Externa.l Debt of Para~:l

(expressed in thousands of U.S. dollars)

T 0 tal Service Pa~ments b~ Currencies Out- Palments Argentine standing Amol'ti- Intel'- Dollar Peso Sterling

Year dEibt zation est Total debt debt debt

1951 12,762 3,043 457 3.500 2,908 445 147 1952 9.689 1.561 395 1,956 1.571 238 147 1953 8,130 1,449 334 1,783 1,406 230 147 1954 6,679 1,445 277 1,722 1,352 223 147 1955 5,233 1,374 218 1,592 1,230 215 147 1956 3.859 1,090 164 1,2.54 899 208 147 1957 2,769 .561 123 684 537 147 1958 2,209 272 103 375 228 ll~7 1959 1,797 196 89 285 177 108 1960 1,601 97 80 177 177 1961 1 • .504 102 75 177 177 1962 l,Ll-02 107 70 177 177 1963 1.295 112 65 177 177 1964 1.183 118 59 177 177 1965 1,065 124 53 177 177 1966 941 130 47 177 177 1967 811 137 40 177 177 1968 674 143 34 177 177 1969 .531 1.51 26 177 177 1970 380 1.58 19 177 177 1971 222 166 11 177 177 1972 56 .56 3 59 59

Table A-l: EXTERNAL DEBT OF PAJ~.AGUAY

(In thousands)

Amount outstandin~ Date In currency Expressed in

U.5 ~ DOLLAR DEBT Export-Im~ort Bank 4%, 1939/42-1958 11 Asuncion ort Concession Corp. 5%,

1941-1971 Dollar payments due on purchase of

utilities J/ . Bank of Braz~l 4%, 1.942-1957

Total dollar debt

STERLING DEBT Sterling bonds

3%, 1886/96-1959 ) 3%, 1915-1959 )

AEGENTHm PESO DEBT Argentine Central Bank 3 3/4%, 1947-1956 Peso payments due on purchase of

utilities 11 Total Argentine peso debt

MISCELlJ.NEOUS C~T:ZDITORS 2/ Total debt

4/30/51

12/31/50Y

12/31/So?i 12/31/50f/

12/31/5oY

12/31/5oY

12/31/5oY

12/31/49

of payment

$ 3,005 ,', ..v 2,228

d'· ·500 'iI>

$ 3,658 W 9t3~

., 393 $ 6,000 ~, ;;p 1,000 c\ 7,000 f\ll

U.S. dollars

3,005

2,228

500 3,658 9,,1$tl.

1,100

1,200

200

1,400

497

12,388

Note: Conversions were made at the following rates: *'1 "" \1"2.80; erl I;: ~.05405; ~1 = 0.20. .

11 As of 12/31/50 there was 0806,854 of principal in arrears. This has all been cleared up but as of 5/15/51 ~183,519.94 of principal pa~1llents due in 1951 were in arrears. (It is unofficially estimated by the Ex-Im Bank that payments mil be up-ta-date by 6/30/51) Y Estimated to be outstanding as of this date according to indicated amortization schedules.

11 The total &~ount which 1~S originally due for the purchase of the utility properties l'TaS ~,)3,000,000, 9,000,000 Argentine pesos, 14,971,902 guaranies. If payments'were made as scheduled, 3,094,402 guaranies remained to be paid as of 12/31/50 e

bI This ruaount represents the sum of the principal payments, as reported by the Bank of Paraguay, due after this date. In their report of the external debt, they give as the awount outstanding the sum of t~e prinCipal and interest payments.

21 The amount of llmiscellaneous creditors" V-ias given in our original source as ~1,967,OOOo However, sinGe it 'was knovvn to include t.he amount due '(:,0 the Argentine Central Bank this was separated and listed aboye. The remainder in-cludes a debt to Italy which amounted to 1,467,492 guaranies in 1948.

§I Original currency amounts not knoym.

Year

1951 1952 1953 1954 19.5.5 19.56 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975

Table .Ar-2.: ESTIIVlATED INTEREST AND AMORTIZATION PAYMEl'fTS all 1JXT:sru'l"AL DELT OF PARAGUAY

(Expressed in thousands of U.S. dollars) nee 1

::;:~port-Ir!lJ2ort l!ank :Jan};: of Brnzil Other dollar debt Amount Payments Amount PalIDents Amount payments out- Araorti- In- out- A.'norti- In- out- .&'!lorti- In-

standing zation· terest Total standin~ zation terest Tote~ standing zation tere~t Total 3,705 1,33~ 113 1,449 3,658 6 636 146 782 2,791 563 gj 114 677

177 177 177 177 177 177 177 177

2,339 440 89 529 3,022 744 121 865 2,228 66 III 1,899 392 72 464 2,279 673 92 765 2,163 69 108 1,506 452 56 508 1,605 603 64 667 2,094 72 105 1,054 499 37 536 1,002 477 40 517 2,021 76 101

555 333 18 351 52.5 350 21 371 1,945 80 97 222 171 . 7 178 175 17.5 7 182 1,865 84 93 So 50 1 51 1,782 88 89

1,693 92 85 1,601 97 80 1,50L~ 102 75 1.402 107 70 1,295 112 6.5 1,183 118 59 1,065 124 53

941 130 47 811 137 40 674 143 34 531 151 26 330 158 19 222 166 11

.56 56 3

177 177 177 177 177 177 177 177 177 177 177 177

59

See footnotes at end of table Q

Table .At-2: nSTH1ATED AlID AMORTIZATION PAYltJNTS on THE EXTERNAL DEBT OF PAI'..AGUAY - Contd.

(Expressed in thousands of U.S. dollars) Pc,ge 2

Total dollar debt ---- ~--sterling b~~d-;;i/ Amount payments Amount Payments

Year out- ~norti- In- out- Amort i- In-standing zation, terest Total §ta~ding zatiQn teres] Total

1951 10,154 2,535 373 2,908 1,208 108 39 l LI-7 1952 7,589 1?250 321 1,571 1,100 III 36 147 1953 6,341 1,134 272 1,406 989 115 32 147 19.54- 5.205 1,127 225 1,352 874 118 29 147 1955 4,077 1,052 178 1,230 756 122 25 147 1956 3,025 763 136 899 634 127 20 147 1957 2,262 430 107 537 507 131 16 147 1958 1,832 138 90 228 377 134 13 147 1959 1,693 92 85 177 104 104 4 108 1960 1,601 97 80 177 1961 1,504 102 75 177 1962 1,402 107 70 177 1963 1,295 112 65 177 1964 1,183 118 59 177 1965 1,065 124 53 177 1966 941 130 47 177 1967 811 137 40 177 1968 674 143 34 177 1969 531 151 26 177 1970 380 158 19 177 1971 222 166 11 177 1972 56 56 3 59 1973 1974 1975

See footnot.es at end of table,

Table A-2: ESTUiATIlD INT!TIR:CST .AND AMORTIZATION PADIBNTS ON TE.::: EXT::mfAL DEl3T OF PA1'L4.GUAY - Contd.

(Expressed in thousands of U.S. dollars) __ •. _ _ ... __________ ~__ _ Pat!:e ,

--- Argentine peso·-debtA Total debt . Amount .... P&ments Amount _ Payments

Year

1951 1952 1953 19.54-1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975

out- Amorti...,. . In- out- ,A:raorti- In-stanc1in~ . zation terest Tota1standin}'; ___ zation terest 1.400 400 45 445 12,762 3,043 457 1,000 200 3B 238 9,689 1,561 395

BOO 200 30 230 B,130 1,449 334 600 200 23 223 6,679 1,445 277 400 200 15 215 5,233 1,374 218 200 200 8 208 3,859 1,090 164

2,769 561 123 2,209 272 103 1,797 196 89 1,601 97 80 1.504 102 75 1,402 107 70 1,295 112 65 1,183 118 59 1,065 124 53

941 130 47 811 137 40 674 143 34 531 151 26 380 158 19 222 166 11 56 56 3

Total

3~500 1,956 1,783 1.722 1,592 1,254

684 375 285 177 177 177 177 177 177 177 177 177 177 177 177

59

11 Consists of debt on ;i.suncion Port Concession and dollar payments due in 1951 on the purchase of utility properties. ~ Includes Q500,OOO due on plITchase of utilities. 51 Consists of debt d.ue to Argentine Central :Dank and Argentine peso payments due in 1951 on the T)urchase of utility

properties • 1jj Includes ;~806t854 of ptmments ',,,hieh 'vere in arrears as of 12/31/50, but \.,hich axe exnected to be cleared up by

6/30/51. ...., _. :i./ These bonds are c:lllable s.t 70? of par. The payments shol;Jn here are those re~)orted to the :Junk by the Goveriltllent

of Paraguay. Sheo tile total of the principal pfl3ments equals the par amount outstanding, it \'lOuld seem that

Table A-2; FOOTNOT~S - Continued

~P~'U!:e 4

they are being retired at par. fJ This a.ilOunt reprosents the sum of the principal P8¥ments, as reported by the :Dank of Paraguay t due after

this date. In their report of the external debt, they give as the amount outstanding the sum of the principal and interest p~ents.

'li A 4% Ie-year loan with 2 years grace.

SQmmary History ef the External Debts ef Paraguay.

1. L."{'Oort-Imuort Ban}c Loans

Tho amount due (~j)3 million) to. the Expert-Import 3ank is the outstanding t.alr:nce ef a credit of ;;)3,400,000 autherized on June 1. 1939. and a creel.it of ;;;3,000,000 au.thorized on Nay 18, 1942. :Both leans \'lere for hiGh,-JSy construction. Of the total amount authorized $6,000,000 has been utilized by Paraguay. the renaining .Aoo,oOO having been cancelled or expired prior to. use. Service pay-meats on these loans, payments on principal in particu.lar, have been made irregularly, but as o.f the end of June all principal pa~~ents are up to. date.

2. Port Concession Loan

This obligation arose from a co:ctract bet1:leen the Paraguayan Govern.'!1ent and a United States construction conpany, ap~roved by a law of October 17, 1927, for constrllctien \"Tork, installations. and im:!}rovements to. and eperation ef the Port of ~A.suncion. 'I'he total cost of constructien, installations and improvements ,-!as fixed at :;2.500,000. The concessionaire "'-/as given the right to operate and maintain the :!.10rt for a :)eriod of eleven years after its opening to. traffic. 11 U)on exoiration of the concession operation of the port and title to all instal-lations ancl equipment ':Jere to revert to the government.

The coryany uas authorized to collect, "turing the period of its operation of the port, certain special charges createcl b;l the la'.-! of October 17. 1927, and to retain abeut half of such collections for oJJeration rmd maintenance 8XJ?enses etc. The remainder i-TS.S to· be delivered to a trustee and 8.?:9lied to amortize bonds issued by the co~~~r~ to finance construction costs. and to pay interest thereon at not more than 8;..l. If, upon eX:9:ration of the concession, any bonds uere still out standing the Governnent "'Quld aSSUJ:n8 res'}onsi bil i ty therefore. and retire them ~:i thin five years.

Dul'ing the life of the concession little "'If,S paid on account of the bonds and as of Decef:1ber 18. 1940, ~-rhen the concession expired, the com-;}any clabed that the a);lount d.ue under the contract 1:1as aboutn.9 million 'I,-,1:ich should be increased to ,;6.6 million by virtue of a "gold clausell contained in its con-tract '.Ii th the government. Settlement "lith the company V!aS embo

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3. Sterling Loans

£he present sterling debt, amounting to ~393.000. represents the out-standing balance of an 8;'; bl ,000 ,000 bond issue offered in 1371. an 8;:; 1.2,000.000 issue of 1872, and I,LI4o.320 in 5~ bonds privately placed in 1915. The issues of 1871 and 1872 are the only Parae;uayan bonds ever !)Ubliely offered abroad and the bO~lds privately l')l~teed in 1915 are the only 1)art issued of a ~1,250,000 loan authorized a IaN of :_~0'7etlb0r 28, 1912. Prices to the government o:B the 1871 and 1872 lo>.l.U.s \Jero 64;. D;nd 73,~, respectiveiy. and :or~ces to the public i1oro 80::;

, "5/ ann. rj i~.

Service pa~7Jlents on all tt~ee loans have been irregular. Default occurred on the 1871 and 1872 loans in 1874, 'JUt durinf; the next year the Govern-ment of Paraguay, out of the :,)roceeds of the loans. repurchased 1:1,400,000 of the 1872 loan. .ci.. settlement ltJas effected in 1385 under uhieh the urincinal amounts and the rate of interest on both loans uere reduced by 50;~. Interest arrears, amoun4;ing to 1:1,306, 000 ylere liquids.ted by the assignment to bondholders of 2,177,341r acres of public land in Paraguay. Payments 1.-Jere continuecl under this arrangement until 1892 \'1hen they uere again inte:!"ru~)ted. .l'J.. settlement of 1896 reduced the rate of interest to 3j;, the present rate.

?a~rments ,,,ere made regularly under this agreement until 1914, and irregularly from 19lt} to 1920, 'l'Then they ceased altogether. In 1915 1.440.320 of the 5;: ;1,250,000 loan that had been authorized by 2, law of ~Yovember 28, 1912 \18.s issued privately in London. ~l. net" settlement \-las made in 1924 1:1hich reduced the interest rate on the 1915 loan to 3j~ of the nominal ')rincinal and, in effect, reduced the redemption value of all three loans to 70;' of the principal anounts. This effective reduction in ;Jrincipal uas accompli shed through P. sti~)ulation in the settlement agreef:1ent that the bonds IJ,ould be retired through the operation of a cumulative sir..killg flmd to be aP!Jlied to the ;')urcbase or tender of bonds at ~e ss than 70/~ of their face value, or, if not thus obtained, through drat'lings at 70/). Funds for this purpose, and for the payment of interest \-,ere to be remitted to London by the Paraguayan Government a.t the minimum rD.te of *,4.381 Y)er month, or ~52,572 per annum. The agreement of 1924 is still in effect but payments due under it have been suspended tvlice - once in 1932, to be resumed in ~1arch 1938, and again in June 1938, to be res~~ed as to interest only in AUb~st 1942 and in full in~iovember 1944. Payments are nOi'l being made according to schedule.

4. ~nk of Brazil Loan

The Ba!L~ of 3razil loan originated from an agreement, a~uroved by the Government of Paral§;uay on June 19, 1942, under ','Thieh the 3an;.

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5. Public Utilities

Until it "'1".$ n.g,tionE,lized in accordance t