El Salvador - The external public debt

E.C. 37 This report is not to be published nor may it be quoted as representing the Bank's views. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT THE EXTERNAL PUBLIC DEBT OF EL SALVADOR September 21, 1954 Economic Staff Prepared by: James J. Lynch Reviewed by: Carel deBeaufort Table of Contents Page I. Outstanding External Public Debt 1 II. Status of the Service of Public Issues a) Historical 2 b) Current service payments 2 Table A-1: External Public Debt Table A-2: Estimated Contractual Interest and Amortization Payments on the External Public Debt THE EXTERNAL PUBLIC DEBT OF EL SALVADOR I. Outstanding External Public Debt 1. As of December 31, 1953 the external public debt of El Salvador stood at an estimated total amount of the equivalent of US$20 million. Of this amount $602,000 1/ (all IBRD) was undisbursed. Debt outstanding December 31, 1953 Total Debt IBRD Loan In currency Expressed In currency Expressed of payment in U.S.$ of payment in U.S.$ (in thousands) U.S. Dollar Debt Securities $ 5,767 2/ 5,767 2Y U.S. dollar portion, IBRD loan 11,583 - 11,583 $11,583 11,583 U.S. Goveri-ment loan 46 h6 Total U.S. dollar debt . . . . . . . 17,796 Canadian Dollar Debt Can. dollar portion, IBRD loan Can$ 257 264 Can$ 257 264 Sterling Debt . . . . . . . . . . L 465 1,301 Swiss Franc Debt Swiss franc portion, IBRD loan Sw fr 3,110 725 Sw fr 3,110 725 Total External Public Debt ..................... 20,086 Total IBRD Loan ........................ .............. ............ ...... 12,5721 2. Of the total US$20.1 million, 88.6%, or $17.8 million, is payable in U.S. dollars. The U.S. dollar portion of the $12.5 million IBRD 41% loan of 1949- 1975 accounted for $11.6 million. Dollar bonds of El Salvador subject to a debt settlement plan of 1946 were outstanding in the amount of $5.8 million 2/; the final dollar obligation is the Export-Import Bank's 4% loan of 1941-19-56 amounting to $446,o00. 3. The sterling debt amounting to 3h65,000, equivalent to US$1.3 million, consists of bonds which were included in the debt settlement plan of 1946. Details of both the sterling and dollar bond history 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 currencies other than U.S. dollars. One is denominated in Canadian dollars amounting to the equivalent of $264,000. The other is in Swiss francs amounting to Sw fr 3.1 million, equivalent to US$725,000. Although the original U.S. dollar equivalent was US$12,545,000 the total shown in the foregoing table is higher because of fluctuations in the value of Swiss francs and Canadian dollars since these currencies were drawn from the IBRD. l/ By July 31, 1954 $190,382 was undisbursed. f/ $2.4 million is held in El Salvador. - 2- II. Status of the Service of Public Issues a) Historical 5. El Salvador's original debt consisted of its portion (2/12 or 627,200) 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 1692 to finance the railroad, were subsequently converted into Salvadorian Railway Company bonds. In 1908 the Salvadorian Government issued 6% bonds amounting to 1163,000 and in 1915 41 year 7% bonds for ;229,908 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 L1,050,000 were offered in exchange for the outstanding defaulted sterling bonds. $10.5 million 7% Series "C" bonds were offered. US$6.5 million in exchange for an equivalent amount of internal debt and US$4 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 $4 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 bonds 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 adjustment plan has been carried out to a degree greater than the original requirements. This was high- lighted by the calling of all the remaining bonds of the ks of 1946-76 amounting to $800,000 on July 1, 1954. b) Current service payments 9. Service payments are estimated to amount to US$2.2 million during 1954 reflecting the payment before maturity of the 4% 1946-76, and US$1.7 million in 1955-56. Payments amount to US$1.6 million in 1957 and move to a level of US$1.7 million in 1959. In 1960 they decline to US 1.h million and in 1960 they move down further to US$964,000 remaining about this level through 197. A payment of US$h82,000 is required during 1975 to repay the balance of the debt. For additional details see Table A-2. Table A-1: EL SALVADOR - EXTERNAL PUBLIC DEBT National and Government Guaranteed Debt (In thousands) Page 1 Debt outstanding Item Dec. 31, 1953 In currency In U.S. dollar of payment equivalents TOTAL EXTERNAL PUBLIC DEBT 20,086 U.S. DOLLAR DEBT 6 17,796 17,796 Publicly issued bonds 1/ 2/ 5,767 5,767 62,475,000 Republic of El Salvador 4%, 1946-1976 895 895 5,285,6oo Republic of El Salvador 3 1/2%, 19e6-1976 4 3,521 3,521 2,271,900 Republic of El Salvador 3%, 1946-1976 1,351 1,351 IBRD loan 11,583 11,583 Portion of 412,545,000 loan to Comision Ejecutiva Hidroelectrica del Rio Lempa 4 1/4%, 1949-1975 6 s 11,583 7/ 11,583 U.S. Government loan 446 446 1,476,000 Export-Import Bank loan 4%, 1941-1956 4 446 446 CANADIAN DOLLAR DEBT Cankp 257 264 IBRD loan Can 257 264 Portion of $12,545,000 loan to Comision Ejecutiva Hicroelectrica delRio Lempa 4 1/4%, 1949-1975 6 Canp 257 j 264 STERLING DEBT 4 465 -1,301 Publicly issued bonds 1/ 2/ 4 h65 1,301 £946,590 Republic of El Salvador 3%, 1946-1976 E 465 g/ 1,301 SISS FRAIC DEBT Sw fr 3,110 725 IBRD loan Sw fr 3,110 725 Portion of 612,545,000 loan to Comision Ejecutiva Hidroelectrica del Rio Lempa 4 1/4%, 1949-1975 6/ Sw fr 3,110 / 725 Exchange rates: The following exchange rates have been used. Par value: F 1 = 42.80 Current market rates: Can& 1 = 1.02627 as of Dec. 31, 1953 and $1.021346 as of June 30, 1954 Sw fr 1 = '0,233236 as of Dec. 31, 1953 and 60.233304 as of July 31, 1954. Table A-1: EL SALVADOR - EXTERNAL PUBLIC DEBT (Continued) Page 2 1/ In February 1932 El Salvador suspended service payments on its external bond issues. Subsequently, two plans were negotiated, the first in 1933 and the second in 1936. Partial payments under these plans were made regularly on deposited bonds through Jan. 1, 1938. From July 1, 1938 through Jan. 1, 19h6, debt service was again suspended. On June 27, 1946 an offer was made to holders of dollar and sterling securities. The plan provides for: (a) Par for par exchange of old Series "A"i, "B" and "C1 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, 1933 through Jan. 1, 1946. These bonds will be issued in a principal amount equal to 50% of the face value of the coupons. (c) Cash payment for the surrender of coupons for which no payrents were received under the plans of 1933 and 1936 and for certificates of deferred interest which were issued to holders of Series "C" bonds. The coupons eligible for the cash settlement are as follows: Bond series Due date of coupons Cash payment "A" Jan, 1, 1933 through Jan. 1, 1935 $200 per $1,000 bond July 1, 1935 through Jan. 1, 1938 U165 per 61,000 bond "C" July 1, 1932 through Jan. 1, 1935 $108 per 1,000 bond July 1, 1935 through Jan. 1, 1938 105 per 'pl,000 bond nB" July 1, 1932 through Jan. 1, 1935 E 15 per Z 100 bond July 1, 1935 through Jan. 1, 1938 Z 12 per Z 100 bond The cash payment for surrender of certificates of deferred interest is 15j of the face value of the certificates. The offerto exchange old bonds for the new issues is open for acceptance until Jan, 1, 1955 and the convertible certificates may be exchanged for 3% bonds until July 1, 1956. On July 1, 1954 the entire issue of la, dollar bonds vas called for redemption at par. As a result, Series "A" bonds surrendered after June 30, 1954 will not be eligible for exchange for l% bonds, but will receive a cash payment equal to the par value plus interest accrued at 4yo p,a. from Jan. 1, 1946 to July 1, 1954. The plan provides for a semi-annual remittance of 400,000. This remittance is to be applied first to payment of interest and the balance to retirement of bonds by purchase. The sinking fund is to be allotted among the various issues as follows: 4% dollar bonds: 37 V/2 -45' 3 1/2% dollar bonds: 201 -25% 3% dollar bonds: 10% - 12 1/2% 3% sterling bonds: 25% Upon retirement of any issue of new bonds, the funds formerly available for service of such issue will be applied pro rata to the amortization of the remaining issues on the basis of the principal amounts then outstanding, con- verted for the purpose of determining the ratio at the then prevailing rate of exchange. In lieu of remitting all or any part of the sinking fund money, the Republic may surrender bonds previously purchased. Table A-1: EL SALVADOR - EXTERNAL PUBLIC DEBT (Continued) Page 3 2/ Amount outstanding include unassented bonds. 3/ Of this amount, 679,500 was held internally and 15,00 externally. The entire issue of assented bonds was called for redemption on July 1, 1954. The Canadian-Foreign Bond Selector reported 74,500 principal amount of bonds unassented as of May 21, 1956. These bonds will be eligible for the cash payment described in footnote 1. / Of this amount, $1,787,800 vas held internally and :1,733,300 externally. / Of this amount, 053,900 was held internally and 846,868 externally. Guaranteed by the Republic of El Salvador. / The status of this loan as of the given dates was as follows: Amount outstanding Amount outstanding Dec. 31, 1953 July 31, 1954 In currency In U.S. dollar In currency In U.S. dollar of payment equivalents of payment equivalents Total 12, 72,076 a/ 12,571,058 a/ Disbursed and still out- standing 11,970,345 12,283,176 U.S. dollars 10,981,060 10,98-,060 v11,260,699 11,260,699 Held by IBRD o9,91060 9,99,, 060 10,352,699 10,352,699 Sold to third parties with IBRD guarantee $ 1,000,000 1,000,000 908,000 908,000 Canadian dollars Can__ 257,149 263,90 Canp 262,615 2682221 Swiss francs Sw fr 3,110,075 725,381 Sw fr 3,232,932 754,256 Undisbursed 601,729 190,382 Repaid - 97,500 To IBRD 5.,550 To third parties - 92,000 a/ The total amount of this loan originally authorized was the equivalent of 412,545,000. The disbursements of Canadian dollars and Swiss francs have been valued at the rates shown in the section above headed "Exchange rates". Since the rates for Canadian dollars and Swiss francs have changed from the rates used at the time of actual disbursement, the total shown here differs from the origi- nally authorized amount. 8/ Of this amount, F 8,060 was held internally and E 456,633-12-0 externally. IBRD - Economic Staff August 17, 1954 Table A-2: EL SALVADOR - ESTIMATED CONTRACTUAL INTEREST AND AMORTIZATION PAYMENTS ON THE EXTERNAL PUBLIC DEBT National and Government Guaranteed Debt (In thousands of U.S. dollar equivalents) Page 1 Service payments U.S. dollars by currency of payment Total Year Debt out- Payments during year U.S. Canadian Pounds Swiss Debt out- Payments during year standing Amorti- In- Total dollars dollars sterling francs standing Amorti- In- Total January 1 zation terest January 1 zation terest 1954 20,086 1,413 802 2,215 1,973 11 200 31 17,796 1,252 721 1,973 1955 18,553 981 729 1,710 1,515 11 152 32 16,439 862 653 1,515 1956 17,249 1,069 684 1,753 1,558 11 152 32 15,290 945 613 1,558 1957 15,841 998 633 1,631 1,436 11 152 32 14,043 869 567 1,436 1958 14,486 1,082 585 1,667 1,454 16 152 45 12,856 930 524 1,454 1959 13,029 1,168 533 1,701 1,453 21 168 59 11,591 9 5 478 1,453 1960 11,484 927 477 1,404 1,139 22 181 62 10,286 710 429 1,139 1961 10,366 530 434 964 879 22 63 9,443 483 396 879 1962 9,836 553 413 966 880 23 63 8,960 504 376 880 1963 9,283 577 388 965 879 23 63 8,456 525 354 879 1964 8,706 601 364 965 879 23 63 7,931 548 331 879 1965 8,105 627 338 965 879 23 63 7,383 571 308 879 1966 7,478 653 311 964 879 22 63 6,812 595 284 879 1967 6,825 683 283 966 880 23 63 6,217 622 258 880 1968 6,142 711 253 964 879 22 63 5,595 648 231 879 1969 5,431 742 222 964 879 22 63 4,947 676 203 879 1970 4,689 774 190 964 879 22 63 4,271 705 174 879 1971 3,915 807 158 965 879 23 63 3,566 735 144 879 1972 3,108 842 123 965 879 23 63 2,831 767 112 879 1973 2,266 879 86 965 879 23 63 2,064 800 79 879 1974 1,387 915 49 964 879 22 63 1,264 834 45 879 1975 472 472 10 482 439 11 32 430 430 9 439 Table A-2: EL SALVADOR - ESTIMATED CONTRACTUAL INTEREST AND AMORTIZATION PAYMENTS ON THE EXTERNAL PUBLIC DEBT (Cont.) National and Government Guaranteed Debt (In thousands of U.S. dollar equivalents) Page 2 U.S. dollars Publicly issued bonds IBRD loan U U.S. Government loan Year Debt out- Payments during year Debt out- Payments during year Debt out- _PaMents during year standing Amorti- In- standing Amorti- In- Tta standing Amcrti- In- January 1 zation terest January 1 ation terest January 1 zation terest 1954 5,767 1,011 222 1,233 11,583 97 492 589 446 144 7 151 1955 4,686 491 157 648 11,451 223 484 707 302 148 12 160 1956 3,908 516 132 648 11,228 275 475 750 154 154 6 160 1957 3,090 544 104 648 10,953 325 463 788 1958 2,228 572 76 648 10,628 358 448 806 1959 1,321 587 45 632 10,270 388 433 821 1960 404 271 14 285 9,882 439 415 854 1961 9,443 483 396 879 1962 8,960 504 376 880 1963 8,456 525 354 879 1964 7,931 548 331 879 1965 7,383 571 308 879 1966 6,812 595 284 879 1967 6,217 622 258 880 1968 5,595 648 231 879 1969 4,947 676 203 879 1970 4,271 705 174 879 1971 3,566 735 144 879 1972 2,831 767 112 879 1973 2,064 800 79 879 1974 1,264 834 45 879 1975 430 430 9 439 See footnotes at end of table Table A-2: EL SALVADOR - ESTIMATED CONTRACTUAL INTEREST AND AMORTIZATION PAYMENTS ON THE EXTERNAL PUBLIC DEBT (Cont.) National and Government Guaranteed Debt (In thousands of U.S. dollar equivalents) Page 3 Canadian dollars 2- Pounds sterling Vd Swiss francs i Year Debt out- Payments during year Debt out- Payments during year Debt out- Payments during year standing Amorti- In- Total standing Amorti- In- standing Amorti- In- January 1 zation terest January 1 zation terest Total January 1 zation terest Total 1954 264 - 11 11 1,301 161 39 200 725 - 31 31 1955 268 - 11 11 1,092 119 33 152 754 - 32 32 1956 268 - 11 11 937 124 28 152 754 - 32 32 1957 268 - 11 11 776 129 23 152 754 - 32 32 1958 268 5 11 16 608 134 18 152 754 13 32 45 1959 263 10 11 21 434 155 13 168 741 28 31 59 1960 253 11 11 22 232 174 7 181 713 32 30 62 1961 242 12 10 22 681 35 28 63 1962 230 13 10 23 646 36 27 63 1963 217 14 9 23 610 38 25 63 1964 203 14 9 23 572 39 24 63 1965 189 15 8 23 533 41 22 63 1966 174 15 7 22 92 43 20 63 1967 159 16 7 23 449 45 18 63 1968 143 16 6 22 404 47 16 63 1969 127 17 5 22 357 49 14 63 1970 110 18 4 22 308 51 12 63 1971 92 19 4 23 257 53 10 63 1972 73 20 3 23 204 55 8 63 1973 53 21 2 23 149 58 5 63 1974 32 21 1 22 91 60 3 63 1975 111 11 ] 11 31 31 1 32 jf Payments which would have to be made on unassented bonds for coupons from July 1, 1946 to the time of assent to the debt plazzate not included. The number of unassented bonds as of Dec. 31, 1953 is not readily available to the IBRD j/ The amount outstanding in 1954 is as of Dec. 31, 1953, but the projection of repayments for IBRD loans is based on disbursements as of July 31, 1954, using the exchange rates of that date. 3] Less than $500. IBRD - Economic Staff August 17, 1954