The external public debt of El Salvador

E.C. 30 RESTRICTED This report is restricted to use within the Bank. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT THE EXTERNAL PUBLIC DEBT OF EL SALVADOR March 22, 1954 Economic Staff Prepared by: James J. Lynch Reviewed by: Carel deBeaufort Table of Contents t. Outstanding External Public Debt 1 II. Status of the Service of Public Issues 2 a) Historical 2 b) Current service payments 2 Tables: A-1: External Public Long-Term Debt A-2: Estimated Contractual Interest and Amortization Payments on External Public Long-Term Debt THE EXTERNAL RJBLIC DEBT OF EL SALVADOR I. Outstanding External Public Debt 1. As of June 30, 1953 the external public debt of El Salvador stood at an estimated total amount of the equivalent of US$18 millioh. Of this amount $2 million 1/ (all IBRD) was undisbursed. Debt outstanding June 30, 1953 Total debt IBRD loan In currency Expressed In currency Expressed of payment in U.S.$ of payment in U.S.$ (in thousands) U.S. Dollar Debt Securities $ 3,h40 2/ 3,449 2/ U.S. dollar portion,IBRD loan $11,802 11,802 $11,802 11,802 U.S. Government loan $ 519 519 Total U.S. dollar debt . . . . . 15,761 Canadian Dollar Debt Can. dollar portion,IBRD loan, Can$ 252 253 Can$ 252 253 Sterling Debt . . . . . . . . . 09 1,425 Swiss Franc Debt Sw fr portion,IBRD loan . .Sw fr 2,190 511 Sw fr 2,190 511 Total External Public Debt . ..... 17,90M Total IBRD Loan ........................................................ 12,566 2. Of the total US$18 million, 88%, or $15.8 million, is payable in U.S. dollars. The U.S. dollar portion of the $12.6 million IBRD 4 1/4% loan of 1949- 1975 accounted for $11.8 million. Dollar bonds held outside of El Salvador subje- cted to a debt settlement plan of 1946 were outstanding in the amount of $3.4 million; the final dollar obligation is the Export-Import Bank's 4% loan of 191- 1956 amounting to $519,000. 3. The sterling debt amounting to 1509,000, equivalent to US$1.4 million, consists of bonds which were included in the debt settlement plan of 1946. Details of both the sterling and dollar bond treatment are given in Footnote 1 of Table A-1 attached. 4. The remainder of El Salvador's external debt consists of two portions of the IBRD US$12,545,000 loan which were taken up in curroncies other than U.S. dollars. One is denominated in Canadian dollars amounting to the equivalent of $253,000. The other is in Swiss franca amoun'ing to Sw fr 2.2 million, equivalent in U.S. dollars to $511,000. Although the original U.S. dollar equivalent was l/ By December 31, 1953 $601,729 was undisbur;ed. I/ An additional $2.4 million is held in El Salvador. - 2 - US$12,545,000 the total shown in the foregoing table is higher because of fluctua- tions in the value of Swiss francs and Canadian dollars since these currencies were drawn from the IBRD. I. Status of the Service of Public Issues a) Historical 5. El Salvador's original debt consisted of its portion (2/12 or 127,200) of the debt of the Central American Federation assumed in 1827. No interest was paid on this debt between 1828-59. In 1860 the amount due was settled by a cash payment of 90%. Two loans totalling L800,000, which were contracted by the Govern- ment in 1889 and 1892 to finance the railroad, were subsequently converted into Salvadorian Railway Company bonds. In 1908 the Salvadorian Government issued 6% bonds amounting to l63,000 and in 1915 h1-year 7% bonds for 1229,908 were issued to pay the back interest of the 1908 loan. In 1921 both the 6's of 1908 and the 7's of 1915 went into default. 6. In 1923 the public debt was refunded. Three series of custom lien bonds were issued in exchange for outstanding internal and external indebtedness. The proceeds of 8% Series A bonds, issued in the amount of US 6 million, were used to pay subsidies due to the El Salvador Railroad Company and the International Railway of Central America and to repay over US$3 million due to bankers and others. 6% Series B bonds issued in the amount of 1,000,000 were offered in exchange for the outstanding defaulted sterling bonds. $10.5 million 7% Series C bonds were offered. US46.5 million in exchange for an equivalent amount of internal debt and US$M million were issued in New York to obtain new funds. 7. In February of 1932 external debt service payments were again suspended. Subsequently partial payments were made under the negotiated debt settlements of 1933 and 1936. From July 1, 1938 to January 1, 1946 all dollar bonds were in complete default. The El Salvadorian Government purchased during this period of default $h million of dollar bonds thus reducing the outstanding amount by more than one-third. Bondholders protested against these purchases at prices which were at a distress level on account of the default. 8. In 1946 a debt adjustment plan negotiated with the Bondholders' Pro- tective Councils was put into operation. This plan, described in detail in Footnote 1 to Table A-1, calls for an exchange of b9nds on a par for par basis. Maturities were extended from 1948 and 1957 to 1976 and the 8% and 7% coupons were cut in half. New 3% bonds due in 1976 were issued for one-half of the eight-year interest arrears of July 1, 1938 to January *1, 1946. The old sterling series, the 6% bonds, were exchanged on a similar basis for 3% bonds of 1946-76. The plan has been regularly carried out to date. b) Current service payments The table on the following page shows yearly service charges on the external debt from 1954 through 1975. Service payments are estimated to amount to $1.5 million during 1954 and US$1.6 million in 1955. Payments amount to US$1.6 million in 1956 and move to a level of USql.4 million in 1958. In 1959 they decline to US$1 million and in 1960 move down further to US$938,000 remaining about this level through 1974. A payment of $482,000 is required during 1975 to repay the balance of the debt. For additional details see the following page and Table A-2. -3 - (expressed in thousands of U.S.$) T o t a 1 Service payments by,currency Debt out- Payments during year standing Amorti- b Swiss Year Jan.1 zation Interest Total U.S.$ Can$ Strl. frs. 1954 17,950 1/ 815 691 1,506 1,278 13 179 36 1955 16,48 967 648 1,615 1,370 16 186 43 1956 15,229 978 607 1,585 1,276 17 246 46 1957 13,945 902 561 1,463 1,152 17 246 48 1958 12,734 838 515 1,353 1,276 18 9 50 1959 11,434 531 478 1,009 938 19 52 1960 lo,849 482 456 938 864 20 5k 1961 10,367 530 435 965 889 20 56 1962 9,836 554 412 966 890 20 56 1963 9,284 576 389 965 889 20 56 1964 8,707 602 363 965 889 20 56 1965 8,106 627 338 965 889 20 56 1966 7,478 654 31 965 889 20 56 1967 6,825 683 283 966 890 20 56 1968 6,142 712 253 965 889 20 56 1969 5,430 741 223 964 888 20 56 1970 4,689 775 190 965 889 20 56 1971 3,914 807 158 965 889 20 56 1972 3,107 843 122 965 889 20 56 1973 2,267 878 87 965 889 20 56 1974 1,388 916 49 965 889 20 56 1975 472 472 10 482 44 10 28 1/ The amount outstanding in 1953 is as of June 30, 1953. Table A-i: EL SALVADOR - EXTERTAL PUBLIC LONG-TERM DEBT National and Government Guaranteed Debt (In thousands) Page 1 Debt outstanding Identificat ion June 30, 1953 In currency Expressed in , of payment U.S. dollars TOTAL EXTERNAL PULIC LONG-TEM DT 17.95 U.S. DOLLAR =T $ 15,761 121ZL1 Bonds i/ $ i.440 0 $2s475,000 Republic of El Salvador L4 , 1946-1976$ 827 ff 827 $5,285,600 Republic of El Salvador 3 1/2 , 1946-1976 $ 1,752.g/ 19752 $2,271,900 Republic of El Salvador !,,1946-1976 $ 861 861 Loans from international organizations $ 11'802 11,802 Portion of $12,545,000 IBRD Comision del Rio Lempa loan 4 1/4p, 1949-1975 .2] $ 11,802 .f 11,802 U.S. Government loan $- 12 512 $1,476,000 Export-Import Bank loan 4,1941-1956 T 519 519 CANADIAN 2)OLLAA DEBT Can $ 252 Loans from international organizations Portion of $12,545,000 IBRD Comision del Rio Lempa loan 4 1/4, 1949-1975 / Can $ 252 97 253 STERLING DEBT 0/1,4 Bonds 1/ Z 946,590 Republic of El Salvador 3%,1946-1976 Z 509 1,425 SWISS FRAN1C DEBT Sw fr 2,190 511 Loans from international organizations Portion of $12,545,000 IBRD Comision del Rio Lempa loan 4 1/4 , 1949-1975 31 Sw fr 2,190 9/ 511 Exchange rates: Can $ 1 = U,S.$ 1.00563 as of June 30, 1953 and U.S. $ 1.0259 as of Dec. 31, 1953; Z 1 = $2.80; Sw fr 1 = $0.23344 as of June 30, 1953 and $0.23324 as of D-c. 31, 1953. 2,/ In February 1932 El Salvador suspende4 service payments,on its external bond is:ues. Subsequently, two plans were negotiated, the first in 1933 and the seco.Ld. in 1936,. partial payments under these plans were made regularly on deposited bonds through Jan. 1, 1938. From July 1, 1938 through Jan. 1, 1946, debt ser;ice was again suspended. On JuLne 27, 1946 an offer was made to holders of dollar and sterling seciri- ties. The pln' provides for o(a) Pr for par exchange of old Series "A', Table A-1: EL SALVADOR - lXTER1AL PUBLIC LONG-TERi DEBT (Cont.) Page 2 WB11, and OV bonds for new bonds carrying one-half of the old interest rates. (b) Issue of new 3% bonds and non-interest bearing convertible certificates in exchange for coupons due July 1, 1938 through Jan. 1, 1946. These bonds will be issued in a principal amount equal to 508 of the face value of the coupon'si (c) Cash a6aydent for the surrender of coupons for which no payments were reeeived under the plans of 1933 and 1936 and for certificates of deferred interest which were issued to holders of Series "C" bonds. The coupons elig- ible for the cash settlement are as follows: Bonds series Dae date of couons Cash parmept "A" Jan. 1, 1933 through Jan. 1, 1935 $200 per $1,000 bond July 1, 1935 through Jan. 1, 1938 $165 per $1,000 bond "C July 1, 1932 through Jan. 1, 1935 $108 per $1,000 bond July 1, 1935 through Jan. 1, 1938 $105 per $1,000 bond OBB July 1, 1932 through Jan. 1, 1935 C 15 per L 100 bond July 1, 1935 through Jan. J. 1938 Z 12 per & 100 bond The cash paWment for surrender of certificates of deferred interest is 15% of the face value of the certificates, The offer to exchange old bonls for the new issues is open for acceptance until Jan. 1, 1954 and the co Lvertible certificates may be exchanged for 3% bonds until July 1, 1955. The plan provides for a semi-annual remittance of $400,000. This remittance is to be applied first to paywent of interest, and the balance (sinking fund) to retirement of bonds by purchase. The sinking fuMs is to be allotted among the various issues as follows; 4 dollar bonds: 37 1/2% - 45% 3 1/2% dollar bonds: 20% - 25% 3% dollar bonds: 10% - 12 1/2% 3% sterling bonds: 21o Upon retirement of any issue of new -onds, the funds formerly available for service of such issue irill be appliea pro rata to th! amortization of the remaining issues on the basis of the principal amounts then outstanding, converted for the purpose of determining the ratio at 'Che then prevailing rate of exchange, In lieu of remitting all or any part of the sinking fund money, the Republic may surrender bonds previously purch,-3ed, Z,f Externally held. A total of $2,371,200 of dollar bonds and Z 8,060 ($22,568) of sterling bonds is held internally. .3/ Guaranteed by the Republic of El Salvador. Table Awl: EL SALVADOR - EXTERNAL PUBLIC LONG-TERM DEBT (Cont.) Page 3 The status of this loan as of June 30, 1953 and Dec. 31, 1953 was as follows: Amount outstanding June 30. 193 In currency Expressed in of Payment U.S. dollars Total 12,566,726.00 a Disbursed and still outstanding 10,529,978.00 U.S. dollars $9,765,585.86 9,765,585.86 pj Canadian dollars Can $ 251,799.25 253,216.88 Swios francs Sw fr2,189,750.07 511,175.26 Undisbursed 2,036,748.00 Amount outstanding op; - 1, 1953 In currency Expressed in of nayment U.S. dollars Total 12,571,992.70 iV Disbursed and still outstanding 11,970,263.80 U.S. dollars $10,981,06o,39 10,981,060,39 1/ Canadian dollars Can $ 257,149.30 263,809.47 Swiss francs Sw fr 3P110,075.19 725,393,94 Undisbursed 601,728.90 a/ The total differs from the original amount of the loan because the non-dollar amounts are converted to U.S. dollars at the current rates. .}/ Of this amount, $1,000,000 has been sold by the Bank with its guarantee to third parties. Table A-2; EL SALVADOR - ESTIMATED CONTRACTUAL INTEREST AND AMORTIZATION PAYMNTS ON EXTERNAL PUBLIC LONG-TERM DEBT (In thousands of U.S. dollar equivalent) Page 1 U, S, dollar debt Total Service payments by currency Total Year Debt out- Payments during year U, S, Canadian Pounds Swiss Debt out- Paments during year standing Amorti Inp- Total dollars dollars sterling francs standin Amorti- In- Total Jan. 1 sation terest Jan. 1 zation terest 1954 17,950 .f 815 691 1,506 1,278 13 179 36 15,761 1/ 667 611 1,278 1955 16,448 967 648 1,615 1,370 16 186 43 14355 794 576 1,370 1956 15,229 978 607 1,585 1,276 17 246 46 13,387 733 543 1,276 1957 13,945 902 561 1,463 1,152 17 246 48 12,459 644 508 1,152 1958 12,734 838 515 1.353 1,276 18 9 50 11,610 799 477 1,276 1959 11,434 531 478 1,009 938 19 52 10,546 497 441 938 1960 10,849 482 456 938 864 20 54 9,995 444 42o 864 1961 10,367 530 435 965 889 20 56 9,551 488 401 889 1962 9,836 554 412 966 890 20 56 9,o62 510 380 890 1963 9,284 576 389 965 889 20 56 8*553 .531 358 889 1964 8,707 602 363 965 889 20 56 8,022 554 335 889 1965 8,106 627 338 965 889 20 56 ,468 578 311 889 1966 7,478 654 311 965 889 20 56 6,890 602 287 889 1967 6,825 683 283 966 890 20 56 6,288 629 261 890 1968 6,142 712 253 965 889 20 56 5,659 656 233 889 1969 5,430 741 223 964 888 20 56 5,003 683 205 888 1970 4,689 775 190 965 889 20 56 4,320 714 175 889 1971 3,914 807 158 965 889 20 56 3,606 743 146 889 1972 3,107 843 122 965 889 20 56 2,863 776 113 889 1973 2,267 878 87 965 889 20 56 2,088 809 80 889 1974 1,388 916 49 965 889 20 56 1,279 844 45 889 1975 472 472 10 482 444 10 28 435 435 9 444 See footnotes at end of table. Table A2t EL SALVADOR - ESTIMATED CONTRACTUAL INTEREST AND AMORTIZATION PAYMENTS ON EXTERNAL PUBLIC LONG-TERM DEBT - Contd. (In thousands of U.S. dollar equivalent) Page 2 U,S, dollar debt Bonp d s IBRD loan - U. S, dollar portion Exaort-Import Bank Year Debt out- Payments during year Debt out- Payments during year Debt out- Payments during year standing Amorti- In- I/Total standing Amorti- In- Total standing Amorti- In- Total Jan. 1 zation teresta/oa Jan. 1 zation terest Jan. 1 zation terest 1954 3,440 I 433 103 536 11,802 Aj 90 492 582 519 If 144 16 160 1955 2,557 438 80 518 11,493 206 486 692 305 150 10 160 1956 1,945 324 62 386 11,287 254 477 731 155 155 4 159 1957 1,426 344 42 386 11,033 300 466 766 1958 877 453 24 477 10,733 346 453 799 1959 159 105 3 108 10,387 392 438 830 1960 9,995 444 420 864 1961 9,551 488 401 889 1962 9,062 510 380 890 1963 8,553 531 358 889 1964 8,022 554 335 889 1965 7,468 578 311 889 1966 6,890 602 287 889 1967 6,288 629 261 890 1968 5,659 656 233 889 1969 5,003 683 205 888 1970 4,320 714 175 889 1971 3,606 743 146 889 1972 2,863 776 113 889 1973 2,088 809 80 889 1974 1,279 844 45 889 1975 435 435 9 444 See footnotes at end of table. Table A-21 EL SALVADOR - ESTIMATED CONTRACTUAL INTERST AND AMORTIZATION PAYNTS ON EXTERNAL PUBLIC LONO-TERM DEBT - Contd. (In thousands of U.S. dollar equivalent) Pare 3 Canadian dollar debt Sterling ebt Swiss franc debt IBRD loan -onds IBRD loan Year Debt out- Payments during year Debt out- Payments during year Debt out- Payments during year standing Amorti., In- standing Amorti- In- Jan. 1 zation terest Jan. 1 Aation terest 1 Jan. 1 zation terest t 1954 253 1 2 11 13 1,425.1! 141 38 179 5111/ 5 31 36 1955 262 5 11 16 1,111 155 31 186 720 13 30 43 1956 257 6 11 17 878 223 23 246 707 16 30 46 1957 251 7 10 17 544 232 14 246 691 19 29 48 1958 244 8 10 18 208 9 9- 672 22 28 50 1959 237 9 10 19 651 25 27 52 1960 228 10 10 20 626 28 26 54 1961 218 11 9 20 598 31 25 56 1962 206 12 8 20 568 32 24 56 1963 195 12 8 20 536 33 23 56 1964 183 13 7 20 502 35 21 56 1965 170 13 7 20 468 36 20 56 1966 157 14 6 20 431 38 18 56 1967 143 14 6 20 394 40 16 56 1968 129 15 5 20 354 41 15 56 1969 114 15 5 20 313 43 13 56 1970 98 16 4 20 271 45 11 56 1971 82 17 3 20 -226 47 9 56 1972 65 18 2 20 179 49- 7 56 1973 48 18 2 20 131 51 5 56 1974 29 19 1 20 80 53 3 56 1975 10 10 10 27 27 1 28 See footnotes on page 4. Table A-2: EL SALVADOR - ESTIMATED CONTRACTUAL INTEREST AD AMORTIZATION PAYMENTS ON EXTERNAL PUBLIC LONG-TERM DEBT - Contd. Paae 4 1/ The amount outstanding in 1953 is as of June 30, 1953. However the projection of repayments shown for IBRD loans is based on disbursements as of December 31, 1953, using the exchange rates of that date. 2/ The projection of repayments was based on the following assumptions: a. the contractual semi-annual payment of $400,000 -(see footnote 1, Table A-1) will be applied to retirement of bonds, although information from El Salvador shows that smaller amounts have been applied in the past, as evidenced below: (Amounts expressed in U.S. dollars) Dollar securities Sterling securities Payments during 1952 Payments during 1952 Amortization Interest Total Amortisation Interest Total Par Cash Par 49 69 00 4 6 223,861 228,407 246,792 643 51,974 52,617 These figures seem to indicate that El Salvador has recently been surrendering bonds in lieu of cash. b. The sinking fund will be applied to purchase of bonds in the following percentages at the prices shownt Percentage of Purchase .1ond issue sinking fund applied price 40 dollar bonds 40% 80 3 1/2% dollar bonds 250 67 3% dollar bonds 100 55 3' sterling bonds 25% 67 c. The entire sinking fund will be applied to redemption of bonds held externally. ./ This does not include payments which would have to be made on unassented bonds for coupons from July 1, 1946 to the time of assent to the debt plan. The number of unassented bonds as of June 30, 1953 is not readily available to the Bank. Ef Less than $500. IBIR- Statistics Section January 7, 1954