| NEW YORK
NEW YORK Nov 29 Governments and companies in
Latin America could halve their global bond sales next year,
bankers say, reflecting both the impact of Donald Trump's U.S.
presidential victory on investor confidence in emergng markets
and the success of previous refinancing efforts.
Bond sales in Latin America and the Caribbean raised about
$120 billion in the year through to the U.S. election on Nov. 8,
but could fall to between $60 billion and $70 billion next year,
according to estimates by some of the region's underwriters.
Trump's campaign policy of trade protection could mean
trouble for Latin American borrowers who have close ties with
the United States, the region's top trade partner. Trump's vow
to boost infrastructure spending has also fanned concern of
faster U.S. interest-rate rises, leading to capital outflows
from emerging markets looking for a safe haven.
If Trump implements his pledged trade protection policy,
restricting imports from Latin America, regional borrowers less
dependent on exports to the U.S. will be better able to sell
debt next year than those with large U.S. exposure, bankers such
as JPMorgan Chase & Co's Lisandro Miguens said. If uncertainty
about Trump's policies persists much beyond the president's
inauguration on Jan. 20, regional borrowing costs could climb,
But "if Treasury market volatility and uncertainty related
to Trump's policies diminish, we could see some normalization in
the primary market," said Miguens, whose team at JPMorgan ranked
as Latin America's No. 1 bond underwriter after working on 36
deals in the first nine months of the year.
The geopolitical risks created by Trump's election could put
the brakes on economic growth in Latin America, where
governments and companies alike have struggled with the end of a
decade-long commodities boom and political volatility in some
countries over the past couple of years.
Most bankers pointed to Mexico, which ships 80 percent of
exports to the United States, as one country that could face
more restricted access to bond market funding than Brazil or
Argentina which are revising economic policies and do relatively
little trade with the United States.
According to JPMorgan's Miguens, the region's economic
outlook has continued to improve and investors are looking for
"places to put their money as cash balances are high." Borrowers
are expected to make the large coupons and principal payments
due in the next four months, which may help demand for new debt,
But the surprise victory by Trump, a billionaire property
mogul, could also make the bond market less attractive to
regional borrowers if the U.S. dollar keeps strengthening
against local currencies, or yields remain volatile, according
to Renato Ejnisman, managing director at Banco Bradesco BBI.
Latin American sovereign and corporate bonds have lost
considerable allure in recent days, with shorter-term yields
jumping amid the recent sell-off in U.S. Treasury notes.
The premium that investors demand to own Latin American
bonds over U.S. Treasuries stands now at about 7.16 percentage
points, compared with about 6.2 points at the start of the year,
according to JPMorgan's EMBI Diversified Latin America bond
"A tighter market for bond fundraising may present the
opportunity for banks across the region to take up some of the
slack left by skittish debt investors," said Baruc Saez, head
of international fixed income for Itaú BBA SA in New York.
But Latin American banks from Mexico to Brazil and Colombia
have restrained disbursements to corporations in the wake of a
widespread economic slowdown, rising delinquencies and tougher
capital restrictions. In Brazil alone corporate loans may shrink
5.0 percent at some of the nation's top lenders.
However, the need to tap bond financing among countries or
companies like Petróleo Brasileiro SA, the world's most indebted
oil firm, might have eased in recent months.
Many of them managed to pre-finance a large amount of their
upcoming debt maturities, said Sáez and Pedro Frade Rodrigues,
Itaú BBA's head of international debt capital markets for
According to people with knowledge of the plan, Petrobras
, as the company is known, was considering selling
between $4 billion and $6 billion in longer-term bonds before
Trump's election. The company scrapped the plan as markets
turned volatile in the run-up to the U.S. ballot, they added.
Petrobras declined to comment.
In any case, those borrowers that gain access to the global
bond market next year may do it just to keep replacing costlier
debt sold in the past, the bankers said.
About 70 percent of this year's bond sales were related to
such liability management, with the rest going to fund
acquisitions or capital spending plans, bankers said.
"While you will see investors turning more selective, the
sovereign and corporate issues with structures offering currency
and rate volatility protection or solutions to potential cash
flow problems will have an edge," Itaú BBA's Rodrigues said.