capital flows to latin america and the caribbean: first ... · debt issuance from latin america and...

ECLAC – Washington Office Capital Flows to Latin America: First Quarter 2019

Capital Flows to Latin America and the Caribbean

First Quarter 2019

Washington, D.C., 23 May 2019

ECLACPublications

Thank you for your interest in

this ECLAC publication

Please register if you would like to receive information on our editorial

products and activities. When you register, you may specify your particular

areas of interest and you will gain access to our products in other formats.

www.cepal.org/en/publications

Publicaciones www.cepal.org/apps

https://www.cepal.org/en/suscripciones?utm_source=publication&utm_medium=pdf&utm_campaign=suscripcion_pdf

http://facebook.com/publicacionesdelacepal

https://www.cepal.org/en/publications

https://www.cepal.org/apps

https://www.cepal.org/en


This document was prepared by Helvia Velloso, Economic Affairs Officer, under the supervision of Inés Bustillo,

Director, ECLAC Washington Office.

The views expressed in this document, which has been reproduced without formal editing, are those of the authors and

do not necessarily reflect the views of the Organization. The report has been prepared based on market views and

developments. All data and information are from market sources, unless otherwise noted.

United Nations Publication

LC/WAS/TS.2019/4

Copyright © United Nations, May 2019. All rights reserved

Printed at United Nations


Contents

Highlights ...................................................................................................................................................... 5

Overview ....................................................................................................................................................... 7

I. Bond markets and debt management ................................................................................................... 11

A. Sovereign Spreads ........................................................................................................................... 13

B. Corporate Spreads ........................................................................................................................... 16

C. New Debt Issuance ..................................................................................................................... 17

1. Sovereign Issuance ............................................................................................................................ 18

2. Corporate Issuance ............................................................................................................................. 19

3. Currency Composition ....................................................................................................................... 23

4. Green Bonds ...................................................................................................................................... 24

II. Bond markets and credit management in the Caribbean ................................................................. 25

III. Portfolio equity flows ..................................................................................................................... 29

IV. Prospects ......................................................................................................................................... 31

Appendix ..................................................................................................................................................... 33


5

Highlights

• Bond issuance from Latin American and the Caribbean (LAC) in the first quarter (Q1) of 2019 was

down 51% from the first quarter of 2018, but up 31% from the fourth quarter of 2018. It was the lowest

first-quarter issuance since 2010.

• From January to April 2019, the region’s total bond issuance reached US$ 36.3 billion, 40% lower than

in the same period in 2018. It was 72% higher than in the last four months of 2018, however, as the

Fed’s January 2019 decision to halt further increases in interest rates led to improved financial

conditions from the end of last year.

• The three top issuers, sovereign and corporate issuance combined, accounted for 65% of the total

issuance in the first four months of 2019 – they included Brazil (30%), Mexico (24%) and Chile (11%).

Corporate issuance represented 68% of the total.

• In the first four months of 2019, both Latin American stocks and debt spreads partially recovered from

the rout caused by the increase in volatility and risk perception in global markets in the second half of

last year. The JPMorgan EMBIG Latin component tightened 73 basis points, while Latin American

stocks gained 7.1% according to the MSCI Latin American index.

• There were three credit rating upgrades and one downgrade in the region from January to April of 2019.

On a quarterly basis, Q1 2019 was the first quarter since Q2 2015 that the number of upgrades in Latin

America and the Caribbean outnumbered the number of downgrades.


7

Overview

Debt issuance from Latin America and Caribbean (LAC) in the first quarter of 2019 (totaling US$ 23.1

billion), was down 51% from the US$ 47.5 billion issued in the same period of 2018 (chart 1). It was the

lowest first-quarter issuance since the first quarter of 2010. Sovereign and corporate issuers got off to a slow

start in 2019, due to the lingering effects of elections in Mexico and Brazil, while Argentine assets remained

under pressure. Corporate issuance fell 35% to US$ 15.3 billion from US$ 23.6 billion a year earlier, and

sovereign issuance fell 67% to US$ 7.8 billion from US$ 23.8 billion. However, when compared to the fourth

quarter of 2018, LAC debt issuance increased by 31%.

CHART 1:

QUARTERLY LAC DEBT ISSUANCE

(US$ Billions)

Source: ECLAC Washington Office, based on data from Dealogic and LatinFinance.

21.8

17.8

33.2

17.4

29.3

22.2

19.720.4

42.8

13.1

31.2

27.327.6

32.1

38.2

25.5

44.3

40.1

27.6

21.1

30.531.2

10.18.0

29.8

45.7

31.2

22.8

45.4

29.7

34.336.1

47.5

22.8

6.1

17.6

23.1

0

5

10

15

20

25

30

35

40

45

50


8

In January, the turnaround by the U.S. Federal Reserve from its previous hawkish policy stance,

calling a halt to further increases in interest rates, contributed to improve financial conditions from the end

of last year, providing more room for other central banks to tilt away from tighter policies. Moreover, after

falling by 15% in 2018, commodity prices bounced 13% in the first two months of the year, delivering

higher export revenues for some emerging market (and LAC) countries. Emerging market assets gained as

a result and volatility receded.

Volatility slowed down considerably in the first quarter of 2019 relative to the final quarter of 2018

but has gone up more recently due to an increase in uncertainty regarding trade negotiations between the

United States and China (chart 2). Investors are growing concerned about the effects the trade dispute

between the world’s two largest economies may have on emerging markets. If the U.S. or China slows

down, investors may fly for safety, which would adversely affect emerging market and LAC assets. The

sharp escalation in the trade dispute comes at a vulnerable time for the world economy, jeopardizing what

investors had seen as a stabilizing albeit gradually slowing Chinese economy.

CHART 2:

CBOE VOLATILITY INDEX IN THE PAST YEAR

(VIX and VXEEM close)

Source: ECLAC Washington Office, based on data from the Chicago Board Options Exchange. Note: The CBOE Volatility Index (VIX) is a key measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices. The VXEEM is the CBOE volatility index for emerging markets (conveyed by MSCI Emerging Markets Index fund option prices).

In the first quarter of 2019, both Latin American stocks and debt spreads partially recovered from

the rout caused by the increase in volatility and risk perception in global markets last year (chart 3). LAC

bond spreads tightened in the beginning of the year, while Latin American equity prices widened. Since

then, however, this asset recovery has stalled and movements in debt spreads and stock prices have taken

place around a flatter trend, lacking a clearer direction.

0

5

10

15

20

25

30

35

40

Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19

VXEEM VIX

October 2018: spike in

volatility triggered by US elections

jitters

Late March 2018: spike in volatility triggered by FOMC's decision on March 21 to raise the target range for the federal funds rate for the first time in 2018.

December 2018: stock markets rout

Early May 2019: spike

triggered by uncertainty

regarding US and China trade deal


9

CHART 3: LATIN AMERICAN EQUITY PRICES VS BOND SPREADS IN 2018 AND 2019 YTD

(MCSI and EMBIG indices)

Source: ECLAC Washington Office, based on data from MSCI Equity Indices and JPMorgan.

Bond spreads tightened for all Latin American countries in our sample in the first quarter of 2019

(chart 4). In April, however, Argentina’s and Venezuela’s spreads widened. Argentina’s spreads increased

176 basis points as access to foreign credit has become more difficult, reigniting currency pressures.

Argentine spreads have continued to increase since then, as political risk ahead of the general elections in

October is on the rise. Venezuela’s spreads widened 322 basis points against a backdrop of political and

humanitarian crises.

CHART 4:

EMBIG SPREAD DIFFERENTIALS IN Q1 2019

(Basis points)

Source: ECLAC Washington Office, based on data from JPMorgan.

80

90

100

110

120

130

140

29-Dec-17 28-Feb-18 30-Apr-18 30-Jun-18 31-Aug-18 31-Oct-18 31-Dec-18 28-Feb-19 30-Apr-19

MSCI EM LATIN AMERICA Latin EMBIG

-43 -25 -33 -44

-234

-49 -38 -37

-1621

-80

-1800

-1600

-1400

-1200

-1000

-800

-600

-400

-200

0

Argentina Brazil Chile Colombia Ecuador Mexico Peru Uruguay Venezuela LatinAmerica


10

Latin American stocks gained 7% in the first quarter according to the MSCI Latin American index,

while emerging markets gained almost 10% and G7 countries 12% (chart 5). EM and LAC equities have

underperformed the S&P 500 index in recent months, in part due to EM currency depreciation.

CHART 5: MSCI EQUITY PRICE INDEX IN 2019 YTD

Source: ECLAC Washington Office based on MSCI Equity Indices, http://www.msci.com/products/indexes/performance.html, prices at the end of the month.

Finally, credit quality in the region remained flat in the first quarter of 2019. There were four positive

(including upgrades and upward outlook revisions) and four negative (including downgrades and downward

outlook revisions) credit rating actions. Since the fourth quarter of 2017 negative actions had outnumbered

positive actions in the region. When considering upgrades and downgrades only, however, this was the first

quarter since the second quarter of 2015 that the number of upgrades in Latin America and the Caribbean

outnumbered the number of downgrades (chart 6).

CHART 6:

NET CREDIT RATING ACTIONS IN LAC (UPGRADES AND DOWNGRADES ONLY) (Number of Actions)

Source: ECLAC Washington Office based on data from Moody’s, Standard & Poor’s, and Fitch.

95

100

105

110

115

120

31-Dec-18 31-Jan-19 28-Feb-19 31-Mar-19 30-Apr-19

EM (EMERGING MARKETS) EM LATIN AMERICA G7 INDEX

0

3

-2 -2

-3

-2 -2

-3

-6

-4

-1

-3 -3 -3

-2

-3

2

-7

-6

-5

-4

-3

-2

-1

0

1

2

3

4

Q12015

Q22015

Q32015

Q42015

Q12016

Q22016

Q32016

Q42016

Q12017

Q22017

Q32017

Q42017

Q12018

Q22018

Q32018

Q42018

Q12019

NET CREDIT RATING ACTIONS 2 per. Mov. Avg. (NET CREDIT RATING ACTIONS)

http://www.msci.com/products/indexes/performance.html


11

I. Bond markets and debt management

EMBI Global bond spreads tightened 62 basis points while its Latin component tightened 80 basis points

in the first quarter of 2019, as a halt in increases in U.S. interest rates called by the Fed and a slowdown in

volatility and risk perception helped support emerging market assets (chart 7). Volatility also receded in the

first quarter of the year (chart 8).

CHART 7:

EMBIG AND LATIN AMERICAN MONTHLY SPREADS

(Basis points)

Source: ECLAC Washington Office, based on data from JPMorgan, "Emerging Markets Bond Index Monitor".

0

200

400

600

800

1000

1200

1400

J J N A S F J D M O M A J J N A S F J D M O M A J J N A S F J D M O M A J J N A S F

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 20182019

EMBIG Latin America

Pre-Asian Crisis EM Spreads

2019


12

CHART 8: CBOE VOLATILITY INDEX AND EMBIG

(Left axis: basis points; right axis: VXEEM close)

Source: ECLAC Washington Office, based on data from JPMorgan and Chicago Board Options Exchange. Note: The VXEEM is the CBOE volatility index for emerging markets (conveyed by MSCI Emerging Markets Index fund option prices).

Credit quality in the region has remained leveled so far. There were four positive and four negative

sovereign credit rating actions in the first quarter of 2019, and one positive and one negative in April (table 1).

TABLE 1:

SOVEREIGN CREDIT RATING ACTIONS IN LATIN AMERICA AND THE CARIBBEAN, 2019 YTD

Date Country Action

Q1 2019 4 positive and 4 negative actions

10-Jan-19 Ecuador Fitch revises the outlook on Ecuador’s B- rating to negative Negative

15-Jan-19 Costa Rica Fitch downgrades Costa Rica’s rating to B+ from BB with negative outlook Negative

25-Jan-19 Nicaragua Moody's changes outlook on Nicaragua's B2 rating to negative Negative

31-Jan-19 Jamaica Fitch upgrades Jamaica’s rating to B+ from B with a stable outlook Positive

21-Feb-19 Bahamas Moody’s changes the outlook on The Bahamas’ Baa3 rating to stable from negative Positive

28-Feb-19 Suriname Moody’s changes the outlook on Suriname’s B2 rating to stable from negative Positive

1-Mar-19 Mexico S&P revises the outlook on Mexico’s BBB+ rating to negative Negative

8-Mar-19 Panama Moody’s upgrades Panama’s rating to Baa1 from Baa2 with a stable outlook Positive

Q2 2019 1 positive and 1 negative action (as of end of April)

11-Apr-19 Guatemala Fitch revises outlook on Guatemala’s BB rating to negative Negative

29-Apr-19 Panama S&P upgrades Panama’s rating to BBB+ from BBB with a stable outlook Positive


Among the four positive actions in the first quarter, two were upgrades and two were outlook

improvements. On January 31, Fitch upgraded Jamaica’s rating to B+ from B with a stable outlook, citing a

track record of large primary surpluses that have cut general government debt/GDP ratio significantly. On

March 8, Moody’s upgraded Panama’s rating to Baa1 from Baa2 with a stable outlook, citing economic

growth and fiscal metrics that exceed that of its rating peers. Regarding outlook revisions, Moody’s improved

the outlook on The Bahamas’ Baa3 rating to stable from negative on February 21, citing the sovereign’s

0

10

20

30

40

50

60

70

0

100

200

300

400

500

600

700

800M

ar-

11

Jun

-11

Se

p-1

1

Dec-1

1

Ma

r-12

Jun

-12

Se

p-1

2

Dec-1

2

Ma

r-13

Jun

-13

Se

p-1

3

Dec-1

3

Ma

r-14

Jun

-14

Se

p-1

4

Dec-1

4

Ma

r-15

Jun

-15

Se

p-1

5

Dec-1

5

Ma

r-16

Jun

-16

Se

p-1

6

Dec-1

6

Ma

r-17

Jun

-17

Se

p-1

7

Dec-1

7

Ma

r-18

Jun

-18

Se

p-1

8

Dec-1

8

Ma

r-19

EMBIG LATIN EMBIG VXEEM


13

important progress in strengthening its fiscal policy framework and transparency, and it also improved the

outlook on Suriname’s B2 rating to stable from negative on February 28, saying that liquidity pressures have

subsided over the past year and that the scope for financing from domestic and external sources has increased.

Among the four negative actions, only one was a downgrade, and the other three were outlook

revisions. On January 15, Fitch downgraded Costa Rica’s rating to B+ from BB with negative outlook, citing

persistently wide fiscal deficits, high near-term financing due to a steep amortization schedule and budget

financing constraints. The outlook downward revisions included: Ecuador – on January 10 Fitch’s outlook

on Ecuador’s B- rating was revised to negative from stable because of large financing needs for 2019-2020

and uncertainty regarding its access to funding sources; Nicaragua – on January 25 Moody's changed its

outlook on Nicaragua's B2 rating to negative saying that the prolonged political crisis is weighing on

economic and fiscal strengths; and Mexico – on March 1 S&P revised the outlook on Mexico’s BBB+ rating

to negative, citing potential for lower economic growth prospects and economic policy for the energy sector.

In April there was one upgrade and one downward outlook revision. Panama was upgraded to BBB+

from BBB with a stable outlook on April 29 by S&P, with the agency citing many years of rapid growth,

above the pace of its rating peers, and economic diversification that have boosted resilience. On April 11,

Fitch revised its outlook on Guatemala’s BB rating to negative, citing heightened political tension and

uncertainty, and a steady erosion in the government’s already low tax collection.

As of end of April 2019, eight sovereigns were on negative outlook by one or more agencies

(Colombia, Costa Rica, Ecuador, Guatemala, Mexico, Nicaragua, Trinidad and Tobago, and Uruguay), and

only one was on a positive outlook (Jamaica). The outlooks show that the balance of risks is towards the

downside (appendix A, table 1).

A. Sovereign Spreads

The JPMorgan’s EMBIG tightened 70 basis points from January to April 2019 – from 435 at the end of

December 2018 to 365 basis points at the end of April 2019 – while its Latin component tightened 73 basis

points, from 568 to 495 basis points. LAC spreads tightened for all countries in our sample except for

Argentina, where there was a widening after January, as political risk ahead of the October presidential

elections intensified (charts 9 and 10). In the case of Venezuela, spreads tightened 2,075 basis points in

January, but widened in February and April, although not enough to make up for the January decline.

CHART 9:

EMBIG SPREAD DIFFERENTIALS: JAN-APR 2019

(Basis points)


133

-28 -39 -52

-266

-65 -42 -36

-1299

-73

-1400

-1200

-1000

-800

-600

-400

-200

0

200

400



14

CHART 10: EMBIG MONTHLY SPREAD DIFFERENTIALS

(Basis points)


Among investment grade countries, Mexico had the highest spreads – 292 basis points – at the end

of April 2019, followed by Colombia with 176 basis points and Uruguay with 171 basis points. Chile and

Peru had the lowest spreads at 127 and 126 basis points, respectively (chart 11).

CHART 11:

EMBIG LATIN: INVESTMENT GRADE ISSUERS

(Basis points)


21

-5 -16 -5

-101

-14 -14 -12

533

-14

77

184

-2

3

-8 -1

3

-79

4

176

-3 -6 -8-32

-16 -4

1

322

7

-200

-100

0

100

200

300

400

500

600


February March April

100

150

200

250

300

350

400

Ap

r-16

Ma

y-1

6

Jun

-16

Jul-1

6

Au

g-1

6

Se

p-1

6

Oct-

16

Nov-1

6

Dec-1

6

Jan

-17

Fe

b-1

7

Ma

r-17

Ap

r-17

Ma

y-1

7

Jun

-17

Jul-1

7

Au

g-1

7

Se

p-1

7

Oct-

17

Nov-1

7

Dec-1

7

Jan

-18

Fe

b-1

8

Ma

r-18

Ap

r-18

Ma

y-1

8

Jun

-18

Jul-1

8

Au

g-1

8

Se

p-1

8

Oct-

18

Nov-1

8

Dec-1

8

Jan

-19

Fe

b-1

9

Ma

r-19

Ap

r-19

Chile Colombia Mexico Peru Uruguay


15

Among the non-investment grade countries, Venezuela had the highest spreads, while Brazil had the

lowest (chart 12). At 5,546 basis points at the end of April 2019, Venezuela maintained the highest debt

spreads of any country in the EMBIG. Spreads for Argentina and Ecuador were at 950 and 560 basis points,

respectively, and Brazilian spreads were at 245 basis points, lower than Mexican spreads.

CHART 12:

EMBIG LATIN: NON-INVESTMENT GRADE ISSUERS

(Basis points)


Historically, LAC sovereign and corporate credit spreads have tracked U.S. corporate credit spreads

for the most part, especially during 2014-2017, but LAC sovereign spreads decoupled negatively for most of

2018 and have done so again in the most recent couple of months (Chart 13).

CHART 13: EMIBG AND EMBIG LATIN VS U.S. HIGH-YIELD SPREADS

(Basis points)

Source: ECLAC Washington Office, based on data from JPMorgan and from the Federal Reserve Bank of St. Louis (ICE BofAML US High Yield Master II Option-Adjusted Spread, Percent, Daily. Not Seasonally Adjusted

0

1000

2000

3000

4000

5000

6000

7000

8000

Ap

r-16

Ma

y-1

6

Jun

-16

Jul-1

6

Au

g-1

6

Se

p-1

6

Oct-

16

Nov-1

6

Dec-1

6

Jan

-17

Feb-1

7

Ma

r-17

Ap

r-17

Ma

y-1

7

Jun

-17

Jul-1

7

Au

g-1

7

Se

p-1

7

Oct-

17

Nov-1

7

Dec-1

7

Jan

-18

Fe

b-1

8

Ma

r-18

Ap

r-18

Ma

y-1

8

Jun

-18

Jul-1

8

Au

g-1

8

Se

p-1

8

Oct-

18

Nov-1

8

Dec-1

8

Jan

-19

Fe

b-1

9

Ma

r-19

Ap

r-19

Brazil Argentina Ecuador Venezuela

0

500

1000

1500

2000

2500

Ja

n-2

00

5

Oct-

200

5

Ju

l-20

06

Apr-

200

7

Ja

n-2

00

8

Oct-

200

8

Ju

l-20

09

Apr-

201

0

Ja

n-2

01

1

Oct-

201

1

Ju

l-20

12

Apr-

201

3

Ja

n-2

01

4

Oct-

201

4

Ju

l-20

15

Apr-

201

6

Ja

n-2

01

7

Oct-

201

7

Ju

l-20

18

Apr-

201

9

EMBIG Latin EMBIG BAML US High-Yield


16

B. Corporate Spreads

LAC corporate bond spreads tightened 51 basis points in the first quarter of 2019, the biggest tightening

since the end of 2016 (chart 14).

CHART 14: CORPORATE EMBI SPREADS: LATIN COMPONENT

(Basis points)


LAC corporate bond spreads tightened less than their sovereign counterparts from January to April

2019: 62 basis points vs 73 basis points, respectively. However, Latin CEMBI spreads are still lower: they

were 171 basis points lesser than their sovereign counterpart at the end of April 2019 (chart 15).

CHART 15: JPMORGAN EMBIG SPREADS, CORPORATE AND SOVEREIGN

(Basis points)


22

-88-69

-21

27

94

30

-37

226

16

-49-68 -62 -68

-38

-4

-46

-3

5

58

-33

43

-51

-150

-100

-50

0

50

100

150

200

250

Q32013

Q42013

Q12014

Q22014

Q32014

Q42014

Q12015

Q22015

Q32015

Q42015

Q12016

Q22016

Q32016

Q42016

Q12017

Q22017

Q32017

Q42017

Q12018

Q22018

Q32018

Q42018

Q12019

200

250

300

350

400

450

500

550

600

29

-Ap

r-16

31

-May-1

6

30

-Jun-1

6

29

-Jul-1

6

31

-Au

g-1

6

30

-Se

p-1

6

31

-Oct-

16

30

-No

v-1

6

30

-De

c-1

6

31

-Jan-1

7

28

-Feb

-17

31

-Mar-

17

28

-Ap

r-17

31

-May-1

7

30

-Jun-1

7

31

-Jul-1

7

31

-Au

g-1

7

29

-Se

p-1

7

31

-Oct-

17

30

-No

v-1

7

29

-De

c-1

7

31

-Jan-1

8

28

-Feb

-18

29

-Mar-

18

30

-Ap

r-18

31

-May-1

8

29

-Jun-1

8

31

-Jul-1

8

31

-Au

g-1

8

28

-Se

p-1

8

31

-Oct-

18

30

-No

v-1

8

31

-De

c-1

8

31

-Jan-1

9

28

-Feb

-19

29

-Mar-

19

30

-Ap

r-19

EMBIG EMBIG LATIN CEMBI CEMBI LATIN


17

Latin American corporate credit spreads are still wider than most emerging market regions’ corporate

spreads, except for Emerging Europe, following a two-year period of low growth and weak economic

fundamentals (chart 16).

CHART 16: CEMBI SPREADS BY REGION

(Basis points)

Source: ECLAC Washington Office, based on data from JPMorgan CEMBI.

C. New Debt Issuance

Total LAC debt issuance from January to April reached US$ 36.3 billion, 40% lower than in the same period

in 2018. However, bond issuance was 72% higher than in the last four months of 2018 (chart 17).

CHART 17: MONTHLY LAC DEBT ISSUANCE

(US$ Billions)


150

200

250

300

350

400

450

500

550

600

650

29

-Ap

r-16

29

-May-1

6

29

-Jun-1

6

29

-Jul-1

6

29

-Au

g-1

6

29

-Se

p-1

6

29

-Oct-

16

29

-No

v-1

6

29

-De

c-1

6

29

-Jan-1

7

28

-Feb

-17

31

-Mar-

17

30

-Ap

r-17

31

-May-1

7

30

-Jun-1

7

31

-Jul-1

7

31

-Au

g-1

7

30

-Se

p-1

7

31

-Oct-

17

30

-No

v-1

7

31

-De

c-1

7

31

-Jan-1

8

28

-Feb

-18

31

-Mar-

18

30

-Ap

r-18

31

-May-1

8

30

-Jun-1

8

31

-Jul-1

8

31

-Au

g-1

8

30

-Se

p-1

8

31

-Oct-

18

30

-No

v-1

8

31

-De

c-1

8

31

-Jan-1

9

28

-Feb

-19

31

-Mar-

19

30

-Ap

r-19

CEMBI LATIN CEMBI ASIA CEMBI EUROPECEMBI AFRICA CEMBI MIDEAST

20.14

13.3012.2411.89

6.08

13.19

10.12

1.17

11.48

24.17

11.61

9.64

4.57

12.0512.24

17.66

3.37

13.23

18.19

11.34

6.61

31.69

11.37

4.45

12.94

6.133.75

2.060.55

3.52

9.298.30

0.00

9.61

3.30

10.20

13.15

0

5

10

15

20

25

30

35

Three-period Moving Average


18

Brazil has the largest share of bond issuances year-to-date – sovereign and corporate combined –

followed by Mexico and Chile. Argentina, which has been a top issuer in the region, did not tap international

markets in the period. Brazil, Mexico and Chile issued (sovereign and corporate combined) US$ 11 billion,

US$ 9 billion, and US$ 4 billion, respectively. Issuances from the three countries accounted for 65% of the

total LAC issuance in the period (chart 18).

CHART 18:

LAC DEBT ISSUANCE IN JAN-APR 2019: COUNTRY BREAKDOWN

(Country shares in percentage)


Some of the largest issuances in the period have come from sovereigns and quasi-sovereigns.

Sovereigns, quasi-sovereigns and supranational entities, including regional development banks,

accounted for 55% of the total amount issued in the first four months of 2019. Investment-grade issuers

– sovereign and corporate combined – dominated LAC issuance in the period, with a 55% share, while

45% of the total was issued by high-yield issuers.

1. Sovereign Issuance

Seven sovereigns – Brazil, Colombia, Ecuador, Mexico, Panama, Paraguay and Uruguay – tapped

international debt markets in January-April of 2019 (appendix C tables 3 and 4). The top three sovereign

issuers were Mexico, Colombia and Brazil (table 2). Mexico had the top share of total sovereign issuance

in the region in terms of amount, and the bigger number of deals (three). Mexico issued a 10-year US$ 2

billion bond in January with a 4.5% coupon, its first international debt sale after President Andrés Manuel

López Obrador took office in December and came back in April with a two-part euro-denominated deal for

US$ 2.8 billion. Mexico last sold euro-denominated notes in January 2018. According to Mexico’s finance

minister, the three deals together cover all the government's foreign currency debt obligations for 2019.

TABLE 2:

LAC SOVEREIGN DEBT ISSUANCE IN THE CROSS-BORDER MARKET, JAN-APR 2019

Sovereign Issuer Total Issuance (US$ Million)

%of the total sovereign Issuance

Number of Deals

Mexico 4,805 40.19% 3

Colombia 2,000 16.73% 2

Brazil 1,500 12.55% 2

Ecuador 1,000 8.36% 1

Panama 1,000 8.36% 1

Uruguay 850 7.11% 1

Paraguay 500 6.69% 1

Total 11.655 100.00% 11


Brazil, 30.34%

Mexico, 23.60%

Chile, 10.91%

Supranational, 8.83%

Colombia, 6.65%

Panama, 4.96%

Peru, 4.65%

Ecuador, 3.86%

Uruguay, 2.34%Paraguay, 2.21%

Jamaica, 1.65%


19

2. Corporate Issuance

The corporate sector (including corporations, banks, quasi-sovereigns and supranationals) accounted for

67.9% of total LAC issuance in January-April 2019 (chart 19).

CHART 19: LAC CORPORATE AND SOVEREIGN ISSUANCE IN JAN-APR 2019

(Percentage)


On a quarterly basis, the share of corporate issuance peaked in the third quarter of 2012 (at 93%).

In the first quarter of 2019, the share was 66% (chart 20).

CHART 20: LAC INTERNATIONAL CORPORATE BOND ISSUANCE AS A SHARE OF THE TOTAL

(Percentage)


Quasi-sovereign and supranational issuers accounted for 34% of total LAC corporate issuance in

international markets in the January-April 2019 period, a decline from the 41% share in 2018. Corporations

and banks accounted for the other 66% (charts 21 and 22).

Corporate, 67.9%

Sovereign, 32.1%

93%

66%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%


20

Excluding sovereign borrowers, 36 corporate issuers (including banks, quasi-sovereign and

supranational companies) from the region sold US$ 25 billion of cross-border bonds in the first four months

of 2019, and 8% of that volume (US$ 3 billion) came from Brazil’s state-owned oil producer Petrobras.

CHART 21:

LAC INTERNATIONAL CORPORATE BOND ISSUANCE BY TYPE IN JAN-APR 2019

(Percentage)


CHART 22:

LAC INTERNATIONAL CORPORATE BOND ISSUANCE BY TYPE

(US$ million)


Issuances from the private corporate sector in January-April 2019, not including quasi-sovereigns

and supranationals, reached US$ 16 billion. The highest monthly activity of the year was in April

(US$ 9 billion), and the lowest in February (chart 23).

Banks, 6.0%

Corporate, 59.8%

Quasi-sovereign and

Supranational, 34.1%

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19

Banks Corporate Quasi-sovereign+Supranational


21

CHART 23: LAC MONTHLY PRIVATE CORPORATE SECTOR BOND ISSUANCE

(US$ Millions)

Source: ECLAC Washington Office, based on data from Dealogic and LatinFinance. Note: issuance from the private corporate sector only (including companies and banks); quasi-sovereigns and supranationals are not included in the chart.

There were only two cross-border debut issuances in January-April 2019 amounting to US$ 650

million (table 3). They accounted for 3% of the total corporate issuance and 2% of the total issuance

(sovereign and corporate combined) in the period. The total was 82% lower than in the same period in 2018.

TABLE 3:

CORPORATE DEBUT ISSUANCES IN LATIN AMERICA AND THE CARIBBEAN, JAN-APR 2019

Country Issuer Amount (million)

Amount US$ (mm)

Coupon (%) Maturity Issue Date

Supranational Fondo Financiero para el Desarrollo de la Cuenca del Plata - FONPLATA

CHF 150 150 0.578% 2024 11-Feb-19

Panama Empresa de Transmisión Eléctrica SA- ETESA

USD 500 500 5.125% 2049 25-Apr-19

650


Investment grade companies had a 46% share of total corporate issuance in the first four months of

the year, while the share of corporate high-yield issuance was 54% (chart 24). Brazilian, Chilean and

Mexican companies accounted for 70% of total corporate issuance in the period (chart 25).

4,007

2,8292,512

3,625

1,050

4,824

7,919

4,704

5,213

6,862

3,5283,637

5,608

1,6711,350

28

1,349

2,6122,502

3,936

0

1,5601,200

4,198

9,243

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000


22

CHART 24: BREAKDOWN OF LAC INTERNATIONAL CORPORATE BOND ISSUANCE BY RATING, JAN-APR 2019

(Percentage of total)

Source: ECLAC Washington Office, based on data from Dealogic and LatinFinance. Note: corporate issuance includes corporates, banks, quasi-sovereigns and supranationals.

CHART 25:

BREAKDOWN OF LAC INTERNATIONAL CORPORATE BOND ISSUANCE BY COUNTRY, JAN-APR 2019

(Country shares in percentage)


From a sectoral perspective, 22% of LAC corporate debt issuance (including corporate, banks, quasi-

sovereigns and supranationals) in the January-April 2019 period came from the financial sector, which

includes commercial banks as well as financial services companies (chart 26). The telecommunications sector

was the second most relevant sector in terms of aggregate volume (18% of total corporate issuance), followed

by energy (12%) , industry, mining and metals, and agriculture, food and beverages (all with a share of 11%).

Investment Grade, 46%

High-Yield, 54%

Brazil, 39%

Chile, 16%

Mexico, 15%

Supranational, 13%

Peru, 7%

Panama, 3%

Jamaica, 2%

Colombia, 2%

Ecuador, 2%


23

CHART 26: LAC INTERNATIONAL CORPORATE BOND ISSUANCE BY SECTORS, JAN-APR 2019

(Percentage of total)


3. Currency Composition

Most of the international debt issuance in the region in the first four months of the year (83%) was

denominated in U.S. dollars (chart 27). There was also issuance in Euros (11.5%); in local currencies (3%),

including Peruvian Soles (the equivalent of a US$ 1 billion total issuance by two Peruvian companies:

Telefónica del Peru (US$ 513 million) and Alicorp (US$ 498 million)) and an issuance by Banco do Brasil

(US$ 101 million equivalent) in Brazilian Reais; and Swiss Francs (3%).

CHART 27: CURRENCY BREAKDOWN, JAN-APR 2019


Commercial Bank and Financial services,

22%

Telecommunications, IT, 18%

Energy - Oil and gas and Power, 12%

Industry, 11%Mining and Metals,

11%

Agriculture, Agribusiness, Food,

11%

Utility, 8%

Transportation, 5%

Construction, 2%

USD, 82.58%

EUR, 11.47%

Local, 3.07%

CHF, 2.88%


24

4. Green Bonds

There were two green bond issuances in the first four months of the year, representing 2.5% of the total

amount issued by Latin American and Caribbean issuers in the period, and 3.7% of the total corporate

issuance. At the end of March, Brazil’s Klabin, a paper producer, issued a 2049 7% US$ 500 million green

bond (Appendix, table 3). Proceeds are to finance and/or refinance, in whole or in part, existing and new

qualifying Eligible Green Projects. On April 11, Peru’s Consorcio Transmantaro SA, the concessionaire of

the transmission line Mantaro-Socabaya, issued a 2034 4.7% US$ 400 million green bond (Appendix,

table 4). Proceeds are to refinance outstanding indebtedness initially used to finance Eligible Green Projects

and to finance new Eligible Green Projects. Moody's Green Bond Assessment was GB2 (very good).

.


25

II. Bond markets and credit management in the Caribbean1

Caribbean spreads are lower on average than spreads for the LAC region as a whole (chart 28).The spread

gap between the Caribbean countries and the EMBIG Latin component, which from late 2010 to late 2012

had widened almost 1,000 basis points because of the high number of defaults in the Caribbean region, has

been negative since last year, although it closed momentarily in January 2019.

CHART 28: EMBIG SPREADS, CARIBBEAN VERSUS LAC

(Basis points)

Source: ECLAC Washington Office, based on data from JPMorgan. The Caribbean average includes Belize, Jamaica, and Trinidad and Tobago.

1 Antigua and Barbuda, Bahamas, Barbados, Belize, Dominica, Grenada, Guyana, Jamaica, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and

the Grenadines, Suriname, and Trinidad and Tobago. Of these 13 countries, only a few have tapped international capital markets.

350

400

450

500

550

600

Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19

EMBIG Latin Average Caribbean


26

Caribbean spreads tightened 55 basis points from January to April 2019, compared to 73 basis points

for the EMBIG Latin component, and at the end of April 2019 were 48 basis points lower than the EMBIG

Latin spreads. Both Jamaica’s and Trinidad and Tobago’s spreads are lower than the Latin American

average (chart 29). Spreads for Trinidad and Tobago, Jamaica, and Belize tightened 82, 45 and 39 basis

points in the first four months of 2019, respectively.

CHART 29:

CARIBBEAN COUNTRIES: EMBIG SPREADS, JAN-APR 2019

(Basis points)


Credit Rating Actions

There were three positive credit rating actions in the Caribbean in the the first quarter of 2019 and no actions

in April (table 4).

TABLE 4: SOVEREIGN CREDIT RATING ACTIONS IN THE CARIBBEAN, JAN-APR 2019

Date Country Action

2019 YTD 3 positive actions

Q1 2019 3 positive actions

31-Jan-19 Jamaica Fitch upgrades Jamaica’s rating to B+ from B with a stable outlook Positive

21-Feb-19 Bahamas Moody’s changes the outlook on The Bahamas’ Baa3 rating to stable from negative Positive

28-Feb-19 Suriname Moody’s changes the outlook on Suriname’s B2 rating to stable from negative Positive


The positive actions were related to Jamaica, Bahamas and Suriname. On January 31, Fitch upgraded

Jamaica’s rating to B+ from B with a stable outlook, citing a track record of large primary surpluses that

have cut general government debt/GDP significantly. On February 21, Moody’s changed the outlook on

The Bahamas’ Baa3 rating to stable from negative, citing the sovereign’s important progress in

strengthening its fiscal policy framework and transparency. And on February 28, Moody’s changed the

0

100

200

300

400

500

600

700

800

900

1000

EMBIG Latin Belize Jamaica Trinidad & Tobago Average Caribbean

2019 YTD


27

outlook on Suriname’s B2 rating to stable from negative, saying that liquidity pressures have subsided over

the past year and that the scope for financing from domestic and external sources has increased. As of April

2019, Moody’s and S&P had a positive outlook on Jamaica, while S&P had a negative outlook on Trinidad

and Tobago’s BBB+ rating.

Debt issuance

There was only one issuance from the Caribbean region in the first four months of 2019, and it was a

corporate issuance. On March 7, Digicel International, with headquarters in Kingston, Jamaica, issued a

2024 8.750% US$ 600 million bond in a private placement. Saddled with US$ 6.8 billion in debt, Digicel

completed a bond swap in January, exchanging US$ 2.92 billion in outstanding notes for an equal amount

in new notes.


29

III. Portfolio equity flows

According to the MSCI Latin American Index, Latin American stocks gained 7.13% from January to April

2019, while the broader emerging market index was up 11.75%. The gains were supported by the U.S.

Federal Reserve’s January decision to bring interest rate increases to a halt. The Fed confirmed its dovish

stance at its March meeting, signaling no additional rate hikes for the year, and one increase in 2020. Latin

America’s stocks have been underperforming as most of the region’s currencies have lost ground against

the U.S. dollar.

Colombia and Peru led performances in Latin America in the first quarter of 2019, with both

markets ending the quarter with double-digit gains (table 5). However, when including April and looking

at the first four months of the year, it is Colombia and Mexico leading performances, followed by Peru

(chart 30). Colombia had the biggest gain (19.5%) from January to April, followed by Mexico (10.5%),

Peru (8.2%), Brazil (6%) and Chile (1.2%). In April, only Mexico’s stocks showed gains (all the other

countries had losses) despite an unexpected contraction in economic growth during the first quarter, as

concerns over the global economy and trading relations between the U.S and China hurt riskier assets.

Argentina’s MSCI index had the only loss in the period (-10.2%).

TABLE 5:

MSCI EQUITY INDICES, JAN-APR 2019

Price Index in USD Variation

Dec 31, 2018 Mar 29, 2019 Apr 30, 2019 Q1 2019 Jan-Apr 2019

Emerging markets 965.776 1,058.127 1,079.24 9.56% 11.75%

Latin America 2,565.923 2,746.109 2,748.791 7.02% 7.13%

Argentina 2,054.332 2,013.078 1,845.488 -2.01% -10.17%

Brazil 1,943.963 2,080.575 2,060.457 7.03% 5.99%

Chile 1,597.557 1,655.528 1,617.105 3.63% 1.22%

Colombia 549.306 683.384 656.402 24.41% 19.50%

Mexico 4,404.032 4,632.662 4,864.794 5.19% 10.46%

Peru 1,661.057 1,837.899 1,797.116 10.65% 8.19%

Source: ECLAC Washington Office, based on data from MSCI Equity Indices, http://www.msci.com/equity/index2.html

http://www.msci.com/equity/index2.html


30

CHART 30: MSCI EQUITY PRICE INDEX, JAN-APR 2019

Source: ECLAC Washington Office, based on data from MSCI Equity Indices, http://www.msci.com/equity/index2.html. Prices at the end of the month.

80

90

100

110

120

130

140

ARGENTINA BRAZIL CHILE

COLOMBIA MEXICO PERU

EM (EMERGING MARKETS) EM LATIN AMERICA

http://www.msci.com/equity/index2.html


31

IV. Prospects

Risk sensitivity among international investors regarding emerging market assets has increased since early

May, as trade disputes between the United States and China have escalated. Emerging market equities have

fallen by more than twice the decline in developed market equities since then, reminding market participants

of the vulnerability of emerging market economies and financial assets to disruptions in world trade. The

U.S.-China trade dispute exacerbates the problems of weak global demand. Of particular concern is the

reduction of import demand from China for commodities and intermediate inputs due to falling exports to

the United States.

As trade tensions between the two largest economies in the world persist, the risks to emerging

market and LAC financial assets remain weighted towards the downside. Investors may eventually end up

demanding a premium to compensate for the danger that these tensions will adversely impact global

economic production and growth. Investor flight to U.S. Treasury notes could hit bonds from the region.

Domestic challenges in some of the largest countries in the region, including electoral and policy

uncertainties, are also adding to investors’ concerns.

Given challenging global and local backdrops, investors in LAC assets may become more selective

in coming months, taking advantage of higher yields on short-dated bonds from some of the issuers from

the region that may not have an investment grade (sovereign or corporate), but have the reserves/funds to

repay debt coming soon.


33

Appendix

35

A. Credit Rating

TABLE 1: CREDIT RATINGS IN LATIN AMERICA AND THE CARIBBEAN, 2019 YTD

Moody's S&P Fitch Recent Moody's Action Recent S&P Action Recent Fitch Action

Rating View Rating View Rating View Action Date Action Date Action Date

Argentina B2 B B Upgrade, O/L stable 29-Nov-17 Downgrade, O/L stable 12-Nov-18 O/L changed to (-) 7-Nov-18

Bahamas Baa3 BB+ O/L changed to stable from (-) 21-Feb-19 Affirmed, O/L stable 14-Dec-17

Barbados Caa3 SD NR Downgrade, O/L stable 9-Mar-17 Affirmed 16-Nov-18

Belize B3 B- NR Affirmed, O/L stable 5-Mar-19 Affirmed, O/L stable 3-Aug-17

Bolivia Ba3 BB- BB- O/L changed to stable from (-) 1-Aug-17 Downgrade, O/L stable 23-May-18 Affirmed, O/L stable 3-Jul-18

Brazil Ba2 BB- BB- O/L changed to stable from (-) 9-Apr-18 Downgrade, O/L stable 11-Jan-18 Affirmed, O/L stable 1-Aug-18

Chile A1 A+ A Downgrade, O/L stable 26-Jul-18 Affirmed, O/L stable 28-Jun-18 Affirmed, O/L stable 22-Feb-19

Colombia Baa2 (-) BBB- BBB O/L changed to (-) 22-Feb-18 Affirmed, O/L stable 14-Dec-18 Affirmed, O/L stable 14-Nov-18

Costa Rica* B1 (-) B+ (-) B+ (-) Downgrade, O/L (-) 5-Dec-18 Downgrade, O/L (-) 21-Dec-18 Downgrade, O/L (-) 15-Jan-19

Cuba Caa2 NR NR O/L changed to stable from (+) 8-Nov-17

Dom. Republic Ba3 BB- BB- Affirmed, O/L stable 27-Feb-19 Affirmed, O/L stable 19-Apr-18 Affirmed, O/L stable 20-Sep-18

Ecuador B3 (-) B- B- (-) O/L changed to (-) 12-Dec-18 Affirmed, O/L stable 28-Jan-19 O/L changed to (-) 10-Jan-19

El Salvador B3 B- B- Upgrade, O/L stable 23-Feb-18 Upgrade, O/L stable 28-Dec-18 Affirmed, O/L stable 13-Jun-18

Guatemala Ba1 BB- BB (-) Affirmed, O/L stable 11-Jun-18 Downgrade, O/L stable 18-Oct-17 O/L changed to (-) 11-Apr-19

Honduras B1 BB- NR Upgrade, O/L stable 22-Sep-17 Upgrade, O/L stable 18-Jul-17

Jamaica B3 (+) B (+) B+ O/L changed to (+) 20-Jul-18 O/L changed to (+) 25-Sep-18 Upgrade, O/L stable 31-Jan-19

Mexico A3 BBB+ (-) BBB+ (-) O/L changed to stable from (-) 11-Apr-18 O/L changed to (-) 1-Mar-19 O/L changed to (-) 31-Oct-18

Nicaragua B2 (-) B- (-) B- O/L changed to (-) 25-Jan-19 Downgrade, O/L (-) 9-Nov-18 Downgrade, O/L (-) 27-Nov-19

Panama Baa1 BBB+ BBB Upgrade, O/L stable 8-Mar-19 Upgrade, O/L stable 29-Apr-19 Affirmed, O/L stable 13-Feb-19

Paraguay Ba1 BB BB+ Affirmed, O/L stable 21-Jun-18 Affirmed, O/L stable 25-Jun-18 Upgrade, O/L stable 11-Dec-18

Peru A3 BBB+ BBB+ Affirmed, O/L stable 23-Aug-17 Affirmed, O/L stable 15-Jun-18 Affirmed, O/L stable 28-Mar-19

St Vincent B3 Affirmed, O/L stable 30-Apr-18

Suriname B2 B B- O/L changed to stable from (-) 28-Feb-19 Affirmed, O/L stable 18-Apr-19 Affirmed, O/L stable 24-Aug-18

T & T Ba1 BBB+ (-) NR Downgrade, O/L stable 25-Apr-17 O/L changed to (-) 27-Apr-18

Uruguay* Baa2 BBB BBB- (-) O/L changed to stable from (-) 13-Jul-17 Affirmed, O/L stable 7-May-19 O/L changed to (-) 5-Oct-18

Venezuela C SD RD Downgrade, O/L stable 9-Mar-18 Affirmed 29-May-18 Affirmed 15-Oct-18

Source: ECLAC Washington Office based on data from Moody’s, Standard & Poor’s, and Fitch. Changes for 2019 YTD are in pink. Note: Moody's ratings are qualified by outlooks and reviews while S&P and Fitch ratings are qualified by outlooks and watches. A review/watch [+ or -] is indicative of a likely short-term development. An outlook [(+) or (-)] suggests that a review/watch or long/intermediate-term movement is likely.

EC

LA

C –

Wash

ing

ton

Office

Cap

ital Flo

ws to

Latin

Am

erica: First Q

uarter 2

01

9

40


36

BOX 1 CREDIT RATING ACTIONS IN LATIN AMERICA AND THE CARIBBEAN, 2019 YTD

There have been 5 positive and 5 negative actions in Latin America and the Caribbean in 2019 YTD.

Positive Actions: 5 (Bold)

January

▪ Ecuador (January 28): S&P affirms Ecuador’s B- rating with a stable outlook (no change).

▪ Jamaica (January 31): Fitch upgrades Jamaica’s rating to B+ from B with a stable outlook, citing a track

record of large primary surpluses that have cut general government debt/GDP significantly.

February

▪ Panama (February 13): Fitch affirms Panama’s BBB rating with a stable outlook (no change).

▪ Bahamas (February 21): Moody’s changes the outlook on The Bahamas’ Baa3 rating to stable from

negative, citing the sovereign’s important progress in strengthening its fiscal policy framework and transparency.

▪ Chile (February 22): Fitch affirms Chile’s rating at A with a stable outlook (no change).

▪ Dominican Republic (February 27): Moody’s affirms the Dominican Republic’s Ba3 rating with a stable outlook

(no change).

▪ Suriname ( February 28): Moody’s changes the outlook on Suriname’s B2 rating to stable from negative,

saying that liquidity pressures have subsided over the past year and that the scope for financing from domestic

and external sources has increased.

March

▪ Belize (March 5): Moody's affirms Belize's B3 rating with a stable outlook (no change).

▪ Panama (March 8): Moody’s upgrades Panama’s rating to Baa1 from Baa2 with a stable outlook, citing

economic growth and fiscal metrics that exceed that of its rating peers, and strengthened fiscal policy framework.

▪ Peru (March 28): Fitch affirms Peru’s BBB+ rating with a stable outlook (no change).

April

▪ Suriname (April 18): S&P affirms Suriname’s B rating with a stable outlook (no change).

▪ Panama (April 29): S&P upgrades Panama’s rating to BBB+ from BBB with a stable outlook, citing many

years of rapid growth, above the pace of its rating peers, and economic diversification that have boosted resilience.

May

▪ Uruguay (May 7): S&P affirms Uruguay’s BBB rating with a stable outlook (no change).

Negative Actions: 5 (Bold)

January

▪ Ecuador (January 10): Fitch revises the outlook on Ecuador’s B- rating to negative from stable, because of

large financing needs for 2019-2020 and uncertainty regarding its access to funding sources. Volatility in oil

prices could also be a risk to Ecuador’s financing plans.

▪ Costa Rica (January 15): Fitch downgrades Costa Rica’s rating to B+ from BB with negative outlook, citing

persistently wide fiscal deficits, high near-term financing due to a steep amortization schedule and budget

financing constraints.

▪ Nicaragua (January 25): Moody's changes outlook on Nicaragua's B2 rating to negative, saying that the

prolonged political crisis is weighing on economic and fiscal strengths.

March

▪ Mexico (March 1): S&P revises the outlook on Mexico’s BBB+ rating to negative, citing potential for lower

economic growth prospects and economic policy for the energy sector. The “negative outlook indicates an at least

one-in-three possibility of a downgrade over the coming year.”

April

▪ Guatemala (April 11): Fitch revises outlook on Guatemala’s BB rating to negative, citing heightened political

tension and uncertainty, and a steady erosion in the government’s already low tax collection.

Source: ECLAC Washington Office based on data from Moody’s, Standard & Poor’s, Fitch and various market sources.


37

B. Latin American Spreads

TABLE 2: SOVEREIGN SPREADS ON JPMORGAN EMBI GLOBAL AND LATIN AMERICAN COMPOSITES

(Basis Points)

EMBI Global Argentina Brazil Chile Colombia Ecuador Mexico Peru Uruguay Venezuela Latin America

30-Apr-15 376 603 297 147 213 672 224 171 210 2200 472

29-May-15 380 601 297 150 220 735 225 174 207 2483 492

30-Jun-15 392 631 309 158 233 824 232 182 213 2879 513

31-Jul-15 407 615 325 179 250 980 244 196 227 2829 533

29-May-15 380 601 297 150 220 735 225 174 207 2483 492

30-Jun-15 392 631 309 158 233 824 232 182 213 2879 513

31-Jul-15 407 615 325 179 250 980 244 196 227 2829 533

31-Aug-15 430 584 363 205 277 1344 264 225 257 2922 566

30-Sep-15 474 591 491 244 318 1451 313 258 305 3129 630

31-Oct-15 422 489 139 210 283 1252 275 220 274 2692 560

30-Nov-15 420 487 450 235 286 1207 280 224 266 2605 561

31-Dec-15 446 438 548 253 317 1266 315 240 280 2807 605

29-Jan-16 494 502 540 274 378 1509 362 273 317 3560 677

29-Feb-16 483 465 530 250 368 1391 353 260 309 3255 639

31-Mar-16 434 444 426 213 295 1058 308 226 279 3108 573

29-Apr-16 410 544 401 183 278 941 286 198 268 2858 541

31-May-16 421 500 418 203 297 855 304 213 271 2933 553

30-Jun-16 407 495 366 202 257 913 293 200 270 2659 522

29-Jul-16 392 496 346 174 270 877 294 194 262 2510 501

31-Aug-16 361 455 315 174 232 863 258 162 229 2456 459

30-Sep-16 360 441 324 180 221 845 294 154 232 2053 456

31-Oct-16 364 452 316 177 237 743 293 155 230 2316 467

30-Nov-16 388 515 338 174 252 736 330 173 252 2343 510

30-Dec-16 365 455 330 158 225 647 296 170 244 2168 473

31-Jan-17 352 469 291 144 209 590 296 159 225 2056 455

28-Feb-17 334 458 280 130 202 572 275 152 227 2050 436

31-Mar-17 331 442 264 133 192 666 255 146 209 2377 436

30-Apr-17 321 405 259 136 195 667 254 144 204 2151 419

31-May-17 323 407 282 134 203 694 255 145 205 2228 426

30-Jun-17 328 432 284 132 200 706 255 145 193 2464 435

31-Jul-17 324 448 263 123 194 673 237 152 182 2977 434

31-Aug-17 321 402 265 130 195 643 244 153 181 3125 424

29-Sep-17 308 377 240 128 185 606 233 140 165 3094 407

31-Oct-17 307 361 237 118 183 563 247 136 154 3171 403

30-Nov-17 313 357 234 123 176 507 232 133 145 4717 417

29-Dec-17 311 351 232 117 173 459 245 136 146 4854 419

31-Jan-18 292 375 217 106 153 442 223 119 136 4660 399

28-Feb-18 311 405 226 120 178 490 238 137 146 4625 418

29-Mar-18 326 420 238 128 180 544 252 156 168 4189 426

30-Apr-18 335 431 242 130 182 667 263 152 185 4344 443

31-May-18 367 521 299 145 205 671 288 168 197 4565 479

29-Jun-18 388 608 326 144 197 761 281 166 200 5011 497

31-Jul-18 354 556 263 133 177 603 274 143 169 5086 465

31-Aug-18 400 771 337 141 184 725 282 147 174 5807 514

28-Sep-18 362 623 289 124 168 622 256 133 156 5499 474

31-Oct-18 392 652 256 140 186 722 307 152 185 5803 512

30-Nov-18 420 706 265 157 210 740 347 162 202 6255 544

31-Dec-18 435 817 273 166 228 826 357 168 207 6845 568

31-Jan-19 378 676 235 145 191 690 330 145 179 4770 498

28-Feb-19 361 697 230 129 186 589 316 131 167 5303 484

29-Mar-19 373 774 248 133 184 592 308 130 170 5224 488

30-Apr-19 365 950 245 127 176 560 292 126 171 5546 495

Source: ECLAC Washington Office with data from “Emerging Markets Bond Index Monitors”; JPMorgan. EMBI Global composition by country (end-April 2019): Mexico, Argentina and Brazil account for 18.57% of the total weighting. EMBI Global composition by region: Latin: 36.17%; Non-Latin: 63.83%.


38

EMBI GLOBAL COMPOSITION (AS OF APRIL 2019)

Mexico, 11.26%

Indonesia, 8.85%

China, 8.74%

Turkey, 5.94%Russia, 4.56%

Brazil, 3.87% Argentina, 3.44%

Philippines, 3.04%Colombia, 2.79%

Saudi Arabia, 2.51%

South Africa, 2.26%

Chile, 2.20%

Oman, 2.05%

Kazakhstan, 1.83%Egypt,

1.77%Qatar, 1.74%

Ukraine, 1.72%

Panama, 1.69%

Ecuador, 1.68%

Peru, 1.63%Venezuela, 1.53%

Others, 24.89%

Others % Dominican Republic 1.50%

Uruguay 1.48%

Lebanon 1.35%

Sri Lanka 1.34%

Malaysia 1.33%

Hungary 1.24%

Nigeria 1.16%

Poland 1.15%

UAE 1.14%

Romania 0.75%

Croatia 0.73%

Bahrain 0.70%

Ghana 0.70%

Azerbaijan 0.66%

Jamaica 0.59%

Angola 0.57%

El Salvador 0.56%

Costa Rica 0.54%

Pakistan 0.53%

Ivory Coast 0.45%

India 0.43%

Paraguay 0.43%

Kenya 0.42%

Iraq 0.38%

Mongolia 0.36%

Lithuania 0.34%

Jordan 0.31%

Guatemala 0.27%

Senegal 0.26%

Morocco 0.24%

Serbia 0.22%

T & T 0.22%

Gabon 0.22%

Zambia 0.22%

Belarus 0.22%

Kuwait 0.21%

Bolivia 0.20%

Honduras 0.19%

Slovakia 0.16%

Namibia 0.13%

Georgia 0.11%

Armenia 0.11%

Vietnam 0.11%

Ethiopia 0.11%

Uzbekistan 0.10%

Tunisia 0.10%

Cameroon 0.09%

Mozambique 0.06%

Papua New Guinea 0.06%

Suriname 0.06%

Tajikistan 0.05%

Belize 0.03%

Total 24.89%


39

C. New LAC Debt Issuance

TABLE 3: LATIN AMERICAN AND CARIBBEAN DEBT ISSUANCE

FIRST QUARTER OF 2019

Country Issuer Amount (million) Amount US$ (mm) Coupon (%) Maturity

Jan-19

Uruguay Oriental Republic of Uruguay USD 850 850 4.375% 2031 Chile Banco del Estado de Chile (BancoEstado) EUR 44 50 1.169% 2025 Mexico United Mexican States USD 2000 2,000 4.500% 2029 Supranational Corporacion Andina de Fomento-CAF Development Bank of Latin America EUR 750 852 0.625% 2024

Colombia Republic of Colombia USD 500 500 4.500% 2029 (r) Colombia Republic of Colombia USD 1500 1,500 5.200% 2049 Colombia Termocandelaria Power Ltd USD 410 410 7.875% 2029 Ecuador Republic of Ecuador USD 1000 1,000 10.750% 2029

Chile Corporación Nacional del Cobre de Chile SA - CODELCO USD 1300 1,300 4.375% 2049 Brazil Suzano Austria GmbH USD 750 750 6.000% 2029 (r) Mexico Credito Real SAB de CV USD 400 400 9.500% 2026 9,613

Feb-19

Chile LATAM Finance Ltd USD 600 600 7.000% 2026

Paraguay Republic of Paraguay USD 500 500 5.400% 2050

Supranational Corporacion Andina de Fomento-CAF Development Bank of Latin America USD 1250 1,250 3.250% 2022

Supranational Fondo Financiero para el Desarrollo de la Cuenca del Plata - FONPLATA CHF 150 150 0.578% 2024

Brazil BTG Pactual USD 600 600 7.750% 2029

Supranational Central American Bank for Economic Integration (CABEI) CHF 200 198 0.200% 2024

3,298

Mar-19

Chile Tanner Servicios Financieros SA CHF 125 125 1.000% 2021

Peru Line One Peru Metro Expansion Co. Ltda. USD 156.1 156 4.737% 2022

Peru Line One Peru Metro Expansion Co. Ltda. USD 117.2 117 4.737% 2022

Jamaica Digicel International USD 600 600 8.750% 2024

Ecuador International Airport Finance SA (Corporación Quiport SA) USD 400 400 12.000% 2033

Brazil Petrobras Global Finance BV USD 750 750 5.750% 2029 (r) Brazil Petrobras Global Finance BV USD 2250 2,250 6.900% 2049

Mexico Cemex SAB EUR 400 452 3.125% 2026

Mexico Banco Mercantil del Norte, S.A. - Banorte CHF 250 249 1.550% 2022

Chile Santander Chile CHF 150 149 0.384% 2024

Brazil Banco do Brasil SA USD 750 750 4.750% 2024

Supranational Millicom International Cellular S.A. USD 750 750 6.250% 2029

Chile AES Gener SA USD 550 550 7.125% 2079

Brazil Republic of Brazil USD 1500 1,500 4.500% 2029

Brazil Atento SA (through subsidiary Atento Luxuco 1) USD 100 100 6.125% 2022 (r) Brazil Klabin Austria GmbH USD 500 500 5.750% 2029

Brazil Klabin Austria GmbH USD 500 500 7.000% 2049 (g) Paraguay Telefonica Celular del Paraguay SA - Telecel USD 300 300 5.875% 2027

10,198


Notes: Q1 2019 Total 23,109

(r): retap.

(g): green.


40

TABLE 4:

LATIN AMERICAN AND CARIBBEAN DEBT ISSUANCE SECOND QUARTER OF 2019

Country Issuer Amount (million) Amount US$

(mm) Coupon (%) Maturity

Apr-19

Mexico United Mexican States EUR 1500 1,683 1.625% 2026 Mexico United Mexican States EUR 1000 1,122 2.875% 2039 Brazil JBS USA Lux SA USD 1000 1,000 6.500% 2029 Brazil JBS Investments II GmbH USD 500 500 7.000% 2026 NC3 (r) Peru Telefonica del Peru SAA PEN 1700 513 7.375% 2027 Peru Alicorp SAA PEN 1640 498 6.875% 2027 Panama Republic of Panama USD 1000 1,000 3.750% 2026 Brazil CSN Resources SA USD 400 400 7.625% 2023 NC3 (r) Brazil CSN Resources SA USD 600 600 7.625% 2026 Mexico Minera y Metalurgica del Boleo SA de CV - MMB USD 400 400 3.250% 2024 Peru Consorcio Transmantaro SA USD 400 400 4.700% 2034 (g) Panama Global Bank Corp (Panama) USD 300 300 5.250% 2029 Chile Banco de Credito e Inversiones - BCI USD 10 10 3-mth Libor +88 2024 Mexico America Movil SAB de CV USD 1000 1,000 3.625% 2029 Mexico America Movil SAB de CV USD 1250 1,250 4.375% 2049 Brazil JBS USA Lux SA USD 400 400 6.500% 2029 (r) Brazil JBS USA Lux SA USD 150 150 5.750% 2025 (r) Brazil JBS USA Lux SA USD 150 150 5.875% 2024 (r) Chile Banco de Credito e Inversiones - BCI CHF 175 172 0.400% 2024 Brazil Banco do Brasil (London Branch) BRL 398 101 9.500% 2026 Panama Empresa de Transmisión Eléctrica SA- ETESA USD 500 500 5.125% 2049 Chile Celulosa Arauco USD 500 500 4.250% 2029 Chile Celulosa Arauco USD 500 500 5.500% 2049 13,149


Notes:

(r): retap. 2019 YTD 36,258 (g): green. NC3: only callable after 3 years.

capital flows to latin america and the caribbean: first ... · debt issuance from latin america and...

Documents