According to a Bloomberg report, Salvadoran vice-president Felix Ulloa stated in Madrid that the People’s Republic of China has offered to buy El Salvador’s foreign debt. Bloomberg details that the vice president gave these statements in Madrid on November 7.
“China has offered to buy all our debt, but we need to tread carefully,” Vice President Felix Ulloa told Bloomberg on the sidelines of an event in Madrid on Monday when asked about a potential debt restructuring. “We are not going to sell to the first bidder, we need to see the conditions.” Bloomberg.
According to the media outlet, the vice president didn’t elaborate further regarding China’s offer. “It’s an indication that the nation continues to look for ways to avoid defaulting on its dollar-denominated debt outright,” notes the article.
El Salvador has to pay in January 2023 the maturity of its 2023 Eurobonds, which initially amounted to $800 million. However, due to the buyback, the country executed in 2022, the January payment will be $670 million.
El Salvador made repurchased its debt for the first time in the country’s financial history. The Bukele administration has called the buyback a success, saving $275 million from the 2023 and 2025 payments. The initial debt for 2023 and 2025 bond emissions totaled $1,600 million.
Currently, El Salvador holds one of the lowest risk ratings in Latin America from Moody’s, S&P, and Fitch Ratings.
The low credit rating is a result of the country’s high debt to its gross domestic product GDP and the implementation of Bitcoin as a legal tender.
China’s donations to El Salvador
El Salvador has maintained good relations with China since President Bukele started its 5-year term. During the pandemic, China donated COVID-19 vaccines to the country, in addition to selling El Salvador enough vaccines to cover its population. The Chinese vaccine, CoronaVac, was the one El Salvador used the most.
Additionally, in 2022, Sunset Park in La Libertad was inaugurated. This park in the popular La Libertad beach was a donation from China.
Furthermore, the Chinese government is constructing a National Library and San Salvador and a National Stadium.
