COVER STORY LOCAL CURRENCY DEBT: Pick and choose

Mar 1, 2014

Currency volatility means foreign investors are shying away from local government bond markets — exaggerating differences between countries. By Eduardo García

A tougher international credit market is likely to mean one main thing in 2014 for sovereign borrowers in Latin America: they will issue less external debt than last year - 28% less, according to ratings agency Fitch. Hard currency issuance will drop to $17.3 billion this year, the agency says, while governments are likely to rely more heavily on their local markets for their funding needs. For public debt managers in Latin America, this means adapting to a new world in which they will struggle to raise external debt on terms as favorable as in the past. "With [the winding down of] QE we'll probably have higher interest rates and higher financing rates than the ones we have enjoyed in the past few years," says Michel Janna, Colombia's director of public credit. "But it's the new equilibrium; it's the new reality and we have to be ready for it." After...

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“The crisis has been a setback for reserve diversification."

Jan Dehn, Ashmore Investment Management