LatAm Corporate Bonds — Strong Expectations for 2021, After a Stellar 2020

  • Latin American (LatAm) cross-border corporate issuance has been strong since 4Q20 as investors have sought higher yields due to the US benchmark interest rate remaining at sub-zero levels amid the pandemic
  • Total LatAm and Caribbean (LAC) issuance grew by 23% y/y in FY20; issuance in January 2021 alone represented c.22% of total FY20 issuance
  • Rising US Treasury yields have made investors wary of investing in emerging-market (EM) credits, but higher yields and ample market liquidity are likely to keep demand for LatAm corporate issuance afloat
  • Wide current account deficits, with LAC’s current account deficit at an average of 2.3% of GDP over 2010–19, coupled with low foreign exchange reserves. Foreign exchange reserves of Brazil, Chile, Colombia, Mexico and Peru (the LA5 economies) stood at c.23% of GDP as of December 2020 and at 18% as of December 2019.
  • High proportion of foreign-currency debt — LAC’s external debt as a percentage of exports of goods and services stood at 226.7% in 2020 and 192.6% in 2019 vs 95.7% and 85.9% in EM Asia and 141.9% and 120.9% in EM Europe, respectively. LAC’s foreign reserves in months of imports stood at 8.9 in 2019 vs 11.5 for EM Europe and Central Asia and 7.9 for South Asia.
  • Political instability, coupled with low productivity. LAC’s real GDP grew at an average of 2.0% over 2010–19 vs 7.0% in EM Asia and 3.1% in EM Europe.
  • LatAm economies are leading exporters of commodities, including natural minerals (oil, copper, and iron ore) and agricultural products (coffee and soybean); therefore, they remain dependent on commodity cycles that are priced and traded in USD.



Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store
Acuity Knowledge Partners

Acuity Knowledge Partners


We write about financial industry trends, the impact of regulatory changes and opinions on industry inflection points.