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Corporate Financing Trends and Balance Sheet Risks in Latin America

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Corporate Financing Trends and Balance Sheet Risks in Latin America

Taking Stock of “The Bon(d)anza”

IMF,

5 Minuten Lesezeit
5 Take-aways
Audio & Text

Was ist drin?

Latin American companies have been enjoying a “bon(d)anza” in global debt markets. Should investors worry?

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Editorial Rating

7

Qualities

  • Innovative

Recommendation

Companies in emerging economies are increasingly tapping global bond markets, and investors around the world have been enthusiastic buyers. While Latin American corporations have benefitted from this trend – especially because of their region’s low internal savings and investment rates – concerns over excessive leverage and currency risk are on the rise. Those old enough to remember the 1980s Latin American debt crisis will be particularly interested in this broad overview of more recent borrowing patterns from International Monetary Fund economists Fabiano Rodrigues Bastos, Herman Kamil and Bennett Sutton. getAbstract recommends their work to global investors, analysts and financial advisers.

Summary

Spurred by excess global liquidity, strong investor appetite, reduced bank lending and good macroeconomic conditions, Latin American corporations are raising more debt in global markets. But as quantitative easing ends in the United States and interest rates increase, Latin American borrowers may face higher debt-service costs, greater foreign exchange risk and potentially slower economic growth that could negatively affect their credit profiles.

An analysis of issuance trends for approximately 1,000 listed nonfinancial firms in Brazil, Chile, Colombia, Mexico and Peru between...

About the Authors

Fabiano Rodrigues Bastos, Herman Kamil and Bennett Sutton are economists at the International Monetary Fund.

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