LatAm banks cheered in cross-border markets, but refi risks loom
Financial institutions are poised to take advantage of funding opportunities in foreign currencies — but they must beware of refinancing risks, say experts
Lenders from across Latin America are finding investors
receptive to bonds in dollars and other foreign currencies, but
caution is needed over the longer term risks, experts said this
||Banco do Brasil sold a euro-denominated
bond earlier this year. Source: Fotos GOVBA
Brazil’s largest banks have sold cross-border
bonds this year, and others may see an opportunity in the
second half, said Miguel Barrios, vice president at BNY Mellon.
Banco do Brasil, for example,
sold a euro-denominated bond in March and is understood to
meeting investors for a dollar-denominated
"The big Brazilian banks, some of the Chilean, Colombian
banks seem to be out there, trying to get to the market," he
"We’ve also seen in the last six months some of
the smaller economies coming to market with their financial
institutions … We expect from some of the market noise
that we’ve heard to see maybe some other Central
American countries coming, maybe some Costa Rican financial
institutions … We’re hoping that after the
World Cup that we start seeing a bit more of the mid-tier
[Brazilian] banks coming back."
Guatemala’s Banco de los Trabajadores (BanTrab) is
one that is looking at returning to the cross-border debt
market, its chief financial officer told
LatinFinance this week.
Euro and sterling markets are open to Latin American
borrowers, especially as ultra-loose monetary policy continues
in Europe, Aureliano Fernández, head of capital markets
funding at CAF, said.
The multilateral development bank sold a €750m 2021 bond
"The traditional European investor is looking to diversify,
getting more balance in the investment portfolio … And
the cross currency swap now is in favor," Fernández
"I would say also, because of the lack of supply, GBP is a
big opportunity. We recently saw
a transaction from UMS, from Mexico, for a 100-year tenor.
There’s opportunity, there’s a market
that’s looking to invest."
Yet a surge in cross-border issuance by Latin banks, taking
advantage of high liquidity world-wide, increases the
refinancing risks when the global interest rate cycle changes,
cautioned René Medrano, senior director at Fitch
"If we move four years ahead, there are going to be some
banks that need tap the market again in order to refinance
their debt. That definitely is a risk, because we
don’t how the market sentiment will be by that
All spoke at LatinFinance’s Bank
Finance LatAm conference held on June 3 in New York.