COVER STORY LOCAL CURRENCY DEBT: Pick and choose
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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