Brazil plans up to $735 million panda bond issuance, says finance minister

BEIJING – Brazil plans to raise up to 5 billion yuan (about $735 million) through its first-ever issuance of panda bonds, Finance Minister Dario Durigan told Reuters on Thursday, marking the largest debut of yuan-denominated debt by a foreign government in China.

The Latin American nation will become the fifth sovereign issuer in the past 12 months to access China’s domestic debt market. Durigan described the move as a “test” that could help Brazilian companies strengthen their presence in China and gain broader access to yuan financing.

The planned issuance amount has not been previously reported.

Panda bonds are part of China’s broader effort to internationalize the yuan and expand its use in global finance. They also provide emerging economies with a relatively low-cost financing option and an alternative to the U.S. dollar-dominated financial system.

“We need to test and begin building Brazil’s sovereign debt track record in China,” Durigan said in an interview after meeting with Chinese central bank Governor Pan Gongsheng in Beijing to finalize the plan. He added that he expects the bonds to be issued within the next two to three months.

“We raised 5 billion euros in Europe. We have not yet finalized the amount for the first issuance in China, but it could be up to 5 billion as well,” Durigan said, referring to yuan.

According to Durigan, Brazilian companies have encouraged the government to issue yuan-denominated debt to help them secure funding through private panda bond offerings and reduce exposure to foreign exchange volatility.

“The profitability of projects in Brazil is very good, but fluctuations in the Brazilian real can affect final returns,” he said. “By issuing debt in yuan, we are providing a currency hedge that can support these investments.”

The planned bond sale highlights growing financial cooperation between Brazil and China as both countries seek to deepen economic ties and expand the use of local currencies in cross-border transactions.

-Reporting by Joe Cash; Editing by Muralikumar Anantharaman and Thomas Derpinghaus/Reuters