as dozens of companies postponed or canceled plans
to go public. Thus far, the prospects for 2009 are even
worse. As foreign investors reallocate capital to cover
losses in other markets and global liquidity remains
scarce, Latin American issuers have been punished.
The financial crisis has exerted substantial downward pressure on asset prices and has curtailed issuance of new corporate securities in the short term. It
remains to be seen whether this will cause a wholesale retrenchment of the progress achieved during
the five years preceding the crisis.
Who Will
Bounce Back?
Not surprisingly, capital continues to gravitate toward
growth. While there has been a substantial deceleration of overall economic growth across the region,
prospects in the leading economies of Latin America remain strong compared with the negative projections in the mature markets of the United States,
Europe and Asia.
Despite months of successive downward revisions, consensus GDP growth estimates for Brazil,
Chile and Colombia remain close to 2 percent, and
projections for Peru still approach 5 percent. Demand
in capital markets serves as a barometer for such
growth. Despite very limited global appetite for new
securities, Brazil and Colombia issued bonds in January 2009 for $1 billion each, and Chile and Peru both
have large issuances planned for the first quarter of
this year. Quasi-sovereigns such as Codelco, Petrobras and Pemex have all conducted large bond issuances this year, demonstrating further that Latin
American blue-chip debt securities are able to compete with high-grade U. S. corporate issuances for the
greatly reduced pool of investor capital available in
post-crisis markets. This relatively limited access to
international capital markets, however, has not been
uniform or widespread throughout the region.
While Latin American markets have never been
monolithic, the financial crisis has precipitated,
and in some cases revealed, further differentiation
among the large economies of the region.
Since the meltdown, the issuance of sovereign
corruption
shAkeup
by Danielle Renwick
Protests spread through
Colombia last November
when thousands of small
investors discovered
that their life savings
had vanished in pyramid
schemes. Losses totaled
nearly $1 billion, with
most concentrated
around David Murcia
Guzmán’s D.M.G. Grupo
Holding. The scandal put
President Álvaro Uribe
under fire for perceived
loose regulation, and
sparked riots that left at
least two dead.
Only weeks later, in a
fraud similar in design
but much larger in scale,
Wall Street investor
Bernard Madoff revealed
that he had misled investors by investing an estimated $65 billion in the
largest Ponzi scheme in
history. The scandal had
ripple effects throughout
Latin America: Spain’s
Banco Santander, one of
the largest banks in the
region, lost an estimated
$3.1 billion in Madoff
investments. Similarly,
Chile’s Celfin Capital SA
and Peru’s largest finan-cial-services company,
Credicorp Ltd., revealed
they too had invested
millions with Madoff.
Similar schemes were
exposed elsewhere. In
south Florida, the Securities and Exchange Commission (SEC) filed suit
against Haitian-Amer-ican investor George
Theodule for swindling
investors from the area’s
bonds has been limited to those countries that have
achieved investment-grade status, rewarding those
economies that were managed well in the years preceding the crisis. To varying degrees, the countries
with the most promising growth prospects—Brazil,
Chile, Colombia, and Peru—were all able to reduce
the proportion of outstanding foreign-currency-denominated debt, foster domestic demand and
diversify sources of growth. Prudent policy decisions
alone, of course, were insufficient to shield these markets from the external shocks caused by the depletion
of global capital and a steep decline in commodities
prices. In the immediate wake of the crisis, the broad
issuance of corporate securities is not likely to return
