Posted by ibot | Posted in bonds , Municipal Bonds , what are municipal bonds | Posted on 1:37 AM
the Metropolitan Municipality of Lima began offering the basis for the tender to select the entity charged with developing the first municipal bond in the history of Peru.
For this process to succeed, it is necessary that both the bidders as the applicants have a clear idea on the response to five key questions, which I shall state:
What are Municipal Bonds? We go to Financial Theory. These are debt instruments backed by future revenues of a municipal government used to finance investment projects.
What issue Municipal Bonds? The key is Business Strategy. To exploit the predictability of cash flows of municipal revenue, channeling resources into projects feasible, useful and properly prioritized.
Why issue Municipal Bonds? The answer lies in the Financial Strategy. Municipal bonds offer safety levels of profitability and attractive to investors, allowing local governments to finance itself.
How to issue Municipal Bonds? Should be examined and Market Regulatory Framework. Since this is the first nationwide broadcast, this is the most critical phase of the process. Fortunately, it has the experience of many countries that have had successful releases in the past.
Who or who should be involved in the process? The central notion is the Capital Market. The actual procedure for the issue must have the support of specialized institutions and experts. The information flow should be distributed and transparently as possible.
Having investigated the issue of municipal bonds over the past seven years and have visited many municipalities and provinces of Peru Lima, I saw that municipalities have interesting projects in areas as diverse as construction of treatment plants, solid waste, treatment plants, sewage plants processing seafood products and agro-industrial, land terminals, shipping companies, markets, tolls, etc.
I could see that the feeling of some "specialists" in municipal finance is that municipalities in Peru are not capable of handling this type of Finance that the current system offers no guarantees the right environment, that there is much corruption municipalities , that city officials do not have the proper training, among other similar ideas.
A few years ago, had asked what was easier: that municipalities issue bonds to create a city or a financial institution, I am absolutely sure the answer would have been the issuing of municipal bonds. However, the most successful example so far as regards municipal finance has been the creation of Municipal Funds. Since the establishment of these boxes, none of them has broken, unlike the history that can boast commercial banks. The Municipality of Piura, for example, invested approximately eighty-five thousand U.S. dollars in Municipal Fund in 1981. Now the assets of the Fund is more than twenty million dollars, reporting earnings for the Township and generating sources of employment.
I am convinced that the issuance of municipal bonds is feasible in Peru and currently projects as well known as the Larco Mar shopping center in Miraflores, could have been financed through these debt instruments.
Municipalities, and the community in general must be aware of the importance of developing new sources of funding to enable the implementation of profitable projects. Municipalities should not be hopeful that central government transfers or increase in municipal taxes will enable them to sustain their spending and investment.
I think the importance of municipal bonds should not only be measured by its contribution as a mere means of financing, but also for the opportunity which means the autonomous management of municipal income and because they constitute a mechanism that contributes to the redistribution of income and which promotes a more efficient use of available resources in the capital market.
For this process to succeed, it is necessary that both the bidders as the applicants have a clear idea on the response to five key questions, which I shall state:
What are Municipal Bonds? We go to Financial Theory. These are debt instruments backed by future revenues of a municipal government used to finance investment projects.
What issue Municipal Bonds? The key is Business Strategy. To exploit the predictability of cash flows of municipal revenue, channeling resources into projects feasible, useful and properly prioritized.
Why issue Municipal Bonds? The answer lies in the Financial Strategy. Municipal bonds offer safety levels of profitability and attractive to investors, allowing local governments to finance itself.
How to issue Municipal Bonds? Should be examined and Market Regulatory Framework. Since this is the first nationwide broadcast, this is the most critical phase of the process. Fortunately, it has the experience of many countries that have had successful releases in the past.
Who or who should be involved in the process? The central notion is the Capital Market. The actual procedure for the issue must have the support of specialized institutions and experts. The information flow should be distributed and transparently as possible.
Having investigated the issue of municipal bonds over the past seven years and have visited many municipalities and provinces of Peru Lima, I saw that municipalities have interesting projects in areas as diverse as construction of treatment plants, solid waste, treatment plants, sewage plants processing seafood products and agro-industrial, land terminals, shipping companies, markets, tolls, etc.
I could see that the feeling of some "specialists" in municipal finance is that municipalities in Peru are not capable of handling this type of Finance that the current system offers no guarantees the right environment, that there is much corruption municipalities , that city officials do not have the proper training, among other similar ideas.
A few years ago, had asked what was easier: that municipalities issue bonds to create a city or a financial institution, I am absolutely sure the answer would have been the issuing of municipal bonds. However, the most successful example so far as regards municipal finance has been the creation of Municipal Funds. Since the establishment of these boxes, none of them has broken, unlike the history that can boast commercial banks. The Municipality of Piura, for example, invested approximately eighty-five thousand U.S. dollars in Municipal Fund in 1981. Now the assets of the Fund is more than twenty million dollars, reporting earnings for the Township and generating sources of employment.
I am convinced that the issuance of municipal bonds is feasible in Peru and currently projects as well known as the Larco Mar shopping center in Miraflores, could have been financed through these debt instruments.
Municipalities, and the community in general must be aware of the importance of developing new sources of funding to enable the implementation of profitable projects. Municipalities should not be hopeful that central government transfers or increase in municipal taxes will enable them to sustain their spending and investment.
I think the importance of municipal bonds should not only be measured by its contribution as a mere means of financing, but also for the opportunity which means the autonomous management of municipal income and because they constitute a mechanism that contributes to the redistribution of income and which promotes a more efficient use of available resources in the capital market.
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