Historically, Peru relied on foreign currency-denominated debt issuance. In 2004, Nuevo sol (‘Sol’) issues made up only 5% of government debt stock. Domestic liquidity was limited and it was not easy for global investors to buy in the domestic market unless they had a local presence or a local custodian.
In 2007, the government set out to reduce its dependency on foreign currencies, ‘solarise’ its debt and diversify its investor base. It turned to Global Depositary Notes (GDNs), which converted sol bonds into dollar instruments that could be traded, cleared and settled the same as other international dollar bonds. By 2013, Nuevo sol bonds made up 42% of Peru’s government debt. The government is looking to reduce dollar borrowings to no more than 30% of the total.
The success of the programme demonstrated there was international appetite for sol bonds, but liquidity in the domestic market remained low.