Capital Flows to Latin America and the Caribbean: Recent developments
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Capital Flows to Latin America and the Caribbean: Recent developments
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This document, prepared by the Economic Commission for Latin America and the Caribbean (ECLAC) Washington Office, presents and analyzes the most recent developments (third quarter of 2018) concerning capital flows to Latin America and the Caribbean. The main highlights are: The Latin America and Caribbean (LAC) region has seen the best and the worst conditions for tapping international capital markets this year. In January 2018, issuers from the region placed their highest ever monthly volume of debt in international markets: US$ 32 billion. First quarter debt issuance in international markets, at US$ 47.5 billion, also broke a record. • However, debt issuance from the region in the third quarter of 2018 was the lowest quarterly issuance since the second quarter of 2009 (US$ 6 billion). From January to October 2018, total international debt issuance amounted to US$ 86 billion, 33% lower than in the same period last year. • On the sovereign side, ten countries tapped international bond markets this year so far, with Argentina topping the list with 30% of the total sovereign issuance from January to October in terms of amount. In January, Argentina issued US$ 9 billion across three sets of bonds. Mexico had the bigger number of deals (seven) in the cross-border market this year, however. • The 3 top issuers year-to-date, sovereign and corporate issuance combined, accounted for 62% of the total issuance in the period – they included Mexico (28%), Brazil (19%), and Argentina (15%). Corporate issuance represented 60% of the total. • Despite a strong cross-border market performance in the beginning of the year, bond activity in the rest of the year was affected by U.S. interest rate hikes, withdrawal of dollar liquidity, dollar strengthening, and instability in stock markets. The appreciation of the U.S. dollar, which reduced the appeal of risky assets, increased pressure on LAC assets. • There was only one international bond issuance with a green focus since the beginning of the year, but there were green and social debt instruments issued in local currency markets. The current slowdown in activity in the green bond market is not expected to continue, and long-term interest in the market remains strong.