Argentina's financial crisis has affected the region's
markets far more deeply than many expected. It has changed the way investors and banks approach risk in Latin America.
Italian retail investor's love affair with Argentine bonds ended abruptly when the sovereign left its creditors in the lurch. Angry Italians want someone to compensate them for their losses.
After jumping through legal hoops, the Argentine oil company Tecpetrol successfully restructured $230 million in bank loans. Securitized revenues made the new debt palatable to creditors and the government.
So far, Uruguay has fended off a collapse of its banking system, which has been rocked by fallout from Argentina's
financial crisis. Despite a $3.8 billion multilateral aid package,the outlook remains grim.
This would seem a good time for shrewd investors to go rummaging for deals in Argentina's corporate bargain basement, but risk still outweighs the promise of reward for all but the most audacious buyers.
With Argentina's provinces and banks withdrawing support, the federal government is running out of options to keep the financial system alive and revive the economy.
To save Argentina's decimated banking system, economist Steve Hanke proposes repealing the Central Bank's ability to issue pesos and giving solvent banks the ability to issue dollar-denominated notes.
A deepening financial crisis is adding another layer of complexity to Argentina's troubles, made worse by the government's extraordinary incompetence.
The upheaval in Argentina has terrified providers of trade finance who are charging more for loans or want borrowers to set up complex structures to lay off risk. Cheap money across the region is a thing of the past.
A group of American economists has dominated the debate over the policies that Latin American governments, especially Argentina's, should adopt. Any policy they suggested would have worked better that what is in place.
With the Argentine economy quickly crumbling and the rules changing with such bewildering speed, little is certain in the debt negotiations of local companies and their creditors.
Against the odds, the best Latin American funds posted respectable returns last year. And despite Argentina?s troubles, economic fundamentals in the region?s main markets look strong and stocks and bonds stand to benefit.
For the real emerging market gamblers, Argentina offered up a wild ride last year. Many investors came out ahead, but the outlook for the emerging market asset class is uncertain.
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Is recent bond market volatility the end of easy borrowing for LatAm issuers?
Yes, dollar borrowing will get more expensive
No, it’s just a bout of market nervousness
There is performance risk that the market is going to have to evaluate and assess. I think that is very healthy for the market because that will enable us to finance a much wider range of projects.
Luis Fernando Andrade, Colombian National Infrastructure Agency
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