LatinFinance - May/June 2017 - 27

investments, deepening the country's
protracted economic crisis.
Even as Ghersi and Haddad continue to
invest in Venezuelan bonds, some larger
funds and money managers have started to
scale back.
Still, buyers of Venezuelan debt are betting the country will keep up its payments
to avoid any disruptions or seizures of its
overseas assets, principally its oil shipments, the financial lifeline of the Maduro
government.
After last year's aggressive bet, Ghersi
says this year Knossos is taking a more
conservative approach by shifting its focus
to more medium-term Venezuelan debt.
"We've been using the word 'complicated' for the last three years to describe
Venezuela's capacity to pay," he says. "Right
now we feel it's time to be more conservative. Venezuela's finances are like a tanker
that's slowly leaking."

FRANCISCO GHERSI
KNOSSOS ASSET MANAGEMENT

"NOW WE FEEL IT'S
TIME TO BE MORE
CONSERVATIVE.
VENEZUELA'S
FINANCES ARE LIKE
A TANKER THAT'S
SLOWLY LEAKING"

concerns over a possible debt default by
PDVSA and also provided the cash-strapped
company with some breathing room.
"We wanted to enter the swap. We felt
good about it," Ghersi says. "We felt that the
2020 notes have a lot more value than the
market is giving them."

A stopgap maneuver
Knossos was a willing participant in
PDVSA's debt swap last year, when bondholders agreed to exchange $2.8 billion of
the company's bonds for $3.4 billion in new
2020 notes. The move helped ease investor

LOCAL MARKET
LIQUIDITY

MAY/

But the swap was a struggle for PDVSA,
and efforts fell short of the $5.3 billion in
bonds that the company had hoped to exchange. To garner the minimum participation needed to complete the swap, PDVSA
not only reduced the amount of tendered
bonds, it also extended the deadline three
times. It went on to sweeten the terms,
including putting up more than half of the
shares in its US division, Citgo Holdings, as
collateral, in the hopes of persuading investors to accept the deal. In the days before
the final deadline, the company warned it
could face difficulty making its debt payments if the swap was unsuccessful.
"We thought the inclusion of the Citgo
shares was important. It helps to assign a recovery value in the case of a default," Ghersi
says. "Our view is, it's the most interesting
bond on the curve."
Still, Ghersi says, for now there is little
reason to expect the country's decline will
turn around. "The government continues
to do what it's doing without making any
significant changes," he says. "A rebound
in the price of oil seems unlikely. So if they
don't attempt something radically different,
the trend is crystal clear. The money will
eventually run out." LF

ISSUE NO. 255

JUNE 2017

Local market borrowing is a staple for companies and banks in Latin America
and the Caribbean. But a lack of liquidity is a hindrance for many.

MEXICO

URUGUAY

Mexico has tackled the problem by
opening the way for local-currency
securities to trade over the Euroclear
corporate to take advantage of the new
format with a February 2015 issue
that raised 24.3 billion pesos

COLOMBIA

2013

3%
23%

2016

"

MXN
$24.3B
($1.6 B at the time)

Uruguay has considered the euroclearable format but has instead
turned to other strategies to facilitate foreign participation locally,
such as an open FX regime and a friendly tax regime. "We started
talking to Euroclear. But when you open up, you open up," says public
credit head Herman Kamil
Uruguayan sovereign debt issued in local and international markets
(% of total issued)

7x

2005

INCREASE

2008

22%

2012

2016

DEBT TRADING

70%

Flourishing

74%
local

€

WHY LOCAL CURRENCY?

Euroclearable or not, local market securities in some
Latin American markets are heavily traded. Indeed,
Mexican local instruments are among the most-traded
across the emerging markets. Other countries, like
Argentina, are gaining ground- but still have
a long way to go.

26%

30%

"We've had massive portfolio investment in the past couple
of years, investors coming to our local currency treasury
market. Three years ago, 3% of our treasuries were in the
hands of foreign investors. Now it's 23%. It's a big change.
trust the economy is managed responsibly."

16%

84%

78%

The importance of being able to borrow in
local currency is clear when you take a
quick look at how regional FX has shifted
against the dollar in the past three years.

foreign

¥

£

MEXICO

+53.85%

2013 MEX$ 13
2016 MEX$ 20

BRAZIL

Trading in local instruments Q2, 2016

2013 R$ 2.4
2016 R$ 3.2

+33.33%

$28b $89b
ARG

BRA

$1
US D

$172b
MEX

How fund returns are
blooming despite a
thorny year

$

COLOMBIA

+57.89%

OL L A R

+21.43%
+134.4%

2013 COL$ 1,900
2016 COL$ 3,000

PERÚ
2013 S/ 2.8
2016 S/ 3.4

LATINFINANCE'S 2017 ASSET MANAGER SCORECARD
PLUS: CAFTA VS TRUMP * COLOMBIA'S MINING HEADACHE
PLAYING WITH FIRE IN VENE * GLOBANT'S ACQUISITION OUTLOOK
PROINVERSIÓN'S QUIJANDRÍA ON PERU'S PPP PUSH

ARGENTINA
2016

$ 15

2013

$ 6.4

www.latinfinance.com/freetrial
January/February 2017- L ATINFINA NCE.COM 27

MAY-JUNECoverFinalFinal.indd 1
LocalCapitalMarktsArgentina.indd 27

4/28/17 1:58 PM

1/3/17 10:43 AM

May/June 2017 - L ATINFINA NCE.COM 27


http://www.LATINFINANCE.COM

Table of Contents for the Digital Edition of LatinFinance - May/June 2017

Contents
LatinFinance - May/June 2017 - Cover1
LatinFinance - May/June 2017 - Cover2
LatinFinance - May/June 2017 - Contents
LatinFinance - May/June 2017 - 2
LatinFinance - May/June 2017 - 3
LatinFinance - May/June 2017 - 4
LatinFinance - May/June 2017 - 5
LatinFinance - May/June 2017 - 6
LatinFinance - May/June 2017 - 7
LatinFinance - May/June 2017 - 8
LatinFinance - May/June 2017 - 9
LatinFinance - May/June 2017 - 10
LatinFinance - May/June 2017 - 11
LatinFinance - May/June 2017 - 12
LatinFinance - May/June 2017 - 13
LatinFinance - May/June 2017 - 14
LatinFinance - May/June 2017 - 15
LatinFinance - May/June 2017 - 16
LatinFinance - May/June 2017 - 17
LatinFinance - May/June 2017 - 18
LatinFinance - May/June 2017 - 19
LatinFinance - May/June 2017 - 20
LatinFinance - May/June 2017 - 21
LatinFinance - May/June 2017 - 22
LatinFinance - May/June 2017 - 23
LatinFinance - May/June 2017 - 24
LatinFinance - May/June 2017 - 25
LatinFinance - May/June 2017 - 26
LatinFinance - May/June 2017 - 27
LatinFinance - May/June 2017 - 28
LatinFinance - May/June 2017 - 29
LatinFinance - May/June 2017 - 30
LatinFinance - May/June 2017 - 31
LatinFinance - May/June 2017 - 32
LatinFinance - May/June 2017 - 33
LatinFinance - May/June 2017 - 34
LatinFinance - May/June 2017 - 35
LatinFinance - May/June 2017 - 36
LatinFinance - May/June 2017 - 37
LatinFinance - May/June 2017 - 38
LatinFinance - May/June 2017 - 39
LatinFinance - May/June 2017 - 40
LatinFinance - May/June 2017 - 41
LatinFinance - May/June 2017 - 42
LatinFinance - May/June 2017 - 43
LatinFinance - May/June 2017 - 44
LatinFinance - May/June 2017 - 45
LatinFinance - May/June 2017 - 46
LatinFinance - May/June 2017 - 47
LatinFinance - May/June 2017 - 48
LatinFinance - May/June 2017 - Cover3
LatinFinance - May/June 2017 - Cover4
https://www.nxtbook.com/nxtbooks/latinfinance/0319QMR
https://www.nxtbook.com/nxtbooks/latinfinance/1218JYM
https://www.nxtbook.com/nxtbooks/latinfinance/paraguay_2018
https://www.nxtbook.com/nxtbooks/latinfinance/8320YTM
https://www.nxtbook.com/nxtbooks/latinfinance/8465TBM
https://www.nxtbook.com/nxtbooks/latinfinance/1476YBW
https://www.nxtbook.com/nxtbooks/latinfinance/7835THM
https://www.nxtbook.com/nxtbooks/latinfinance/8655TGL
https://www.nxtbook.com/nxtbooks/latinfinance/0614IJP
https://www.nxtbook.com/nxtbooks/latinfinance/ecuador_20170910
https://www.nxtbook.com/nxtbooks/latinfinance/2713KNP
https://www.nxtbook.com/nxtbooks/latinfinance/4982CFT
https://www.nxtbook.com/nxtbooks/latinfinance/7803HWE
https://www.nxtbook.com/nxtbooks/latinfinance/3829THA
https://www.nxtbook.com/nxtbooks/latinfinance/7891MDD
https://www.nxtbook.com/nxtbooks/latinfinance/7714JCR
https://www.nxtbook.com/nxtbooks/latinfinance/5619CMK
https://www.nxtbook.com/nxtbooks/latinfinance/6939ASL
https://www.nxtbook.com/nxtbooks/latinfinance/1364ASF
https://www.nxtbook.com/nxtbooks/latinfinance/0453DAS
https://www.nxtbook.com/nxtbooks/latinfinance/0453DAS_supp
https://www.nxtbook.com/nxtbooks/latinfinance/1304APV
https://www.nxtbook.com/nxtbooks/latinfinance/7234GSD
https://www.nxtbook.com/nxtbooks/latinfinance/1643XGS
https://www.nxtbook.com/nxtbooks/latinfinance/9511JKM_supp
https://www.nxtbook.com/nxtbooks/latinfinance/9511JKM
https://www.nxtbook.com/nxtbooks/latinfinance/8745TNV
https://www.nxtbook.com/nxtbooks/latinfinance/3629PBC
https://www.nxtbook.com/nxtbooks/latinfinance/7466TBC_HSBC
https://www.nxtbook.com/nxtbooks/latinfinance/7466TBC_supp
https://www.nxtbook.com/nxtbooks/latinfinance/7466TBC
https://www.nxtbook.com/nxtbooks/latinfinance/9463RVB
https://www.nxtbook.com/nxtbooks/latinfinance/7345GPY
https://www.nxtbook.com/nxtbooks/latinfinance/6398TVB
https://www.nxtbook.com/nxtbooks/latinfinance/4899EXM_supp
https://www.nxtbook.com/nxtbooks/latinfinance/4899EXM
https://www.nxtbook.com/nxtbooks/latinfinance/3885CWS
https://www.nxtbook.com/nxtbooks/latinfinance/45923GBC
https://www.nxtbook.com/nxtbooks/latinfinance/67449NBD
https://www.nxtbook.com/nxtbooks/latinfinance/46733NLP
https://www.nxtbook.com/nxtbooks/latinfinance/78456HCL
https://www.nxtbook.com/nxtbooks/latinfinance/89456RBM
https://www.nxtbook.com/nxtbooks/latinfinance/22278HBL
https://www.nxtbook.com/nxtbooks/latinfinance/2895YBM
https://www.nxtbook.com/nxtbooks/latinfinance/9033TBM
https://www.nxtbook.com/nxtbooks/latinfinance/8934TNP
https://www.nxtbook.com/nxtbooks/latinfinance/costarica20130304
https://www.nxtbook.com/nxtbooks/latinfinance/4672PNB
https://www.nxtbook.com/nxtbooks/latinfinance/9377BKL
https://www.nxtbook.com/nxtbooks/latinfinance/drmtest
https://www.nxtbook.com/nxtbooks/latinfinance/drmtest2
https://www.nxtbook.com/nxtbooks/latinfinance/5532LMC
https://www.nxtbook.com/nxtbooks/latinfinance/9044TBM
https://www.nxtbook.com/nxtbooks/latinfinance/4877RBC
https://www.nxtbook.com/nxtbooks/latinfinance/3008JHV
https://www.nxtbook.com/nxtbooks/latinfinance/3728YBC
https://www.nxtbook.com/nxtbooks/latinfinance/9337KLM
https://www.nxtbook.com/nxtbooks/latinfinance/5674GNJ
https://www.nxtbook.com/nxtbooks/latinfinance/8330KMC
https://www.nxtbook.com/nxtbooks/latinfinance/7663HCM
https://www.nxtbook.com/nxtbooks/latinfinance/2319ZMB
https://www.nxtbook.com/nxtbooks/latinfinance/7110MKL
https://www.nxtbook.com/nxtbooks/latinfinance/8599FHG
https://www.nxtbook.com/nxtbooks/latinfinance/4517HJK
https://www.nxtbook.com/nxtbooks/latinfinance/7813GHB
https://www.nxtbook.com/nxtbooks/latinfinance/1564FBM
https://www.nxtbook.com/nxtbooks/latinfinance/8884HGV
https://www.nxtbook.com/nxtbooks/latinfinance/7863SVB
https://www.nxtbook.com/nxtbooks/latinfinance/5233SFB
https://www.nxtbook.com/nxtbooks/latinfinance/5899SML
https://www.nxtbook.com/nxtbooks/latinfinance/4311PMN
https://www.nxtbook.com/nxtbooks/latinfinance/1366FBB
https://www.nxtbook.com/nxtbooks/latinfinance/9355AXC
https://www.nxtbook.com/nxtbooks/latinfinance/8559EBN
https://www.nxtbook.com/nxtbooks/latinfinance/8244QXC
https://www.nxtbook.com/nxtbooks/latinfinance/1779BBN
https://www.nxtbook.com/nxtbooks/latinfinance/7144XVB
https://www.nxtbook.com/nxtbooks/latinfinance/8971QGH
https://www.nxtbook.com/nxtbooks/latinfinance/200805
https://www.nxtbook.com/nxtbooks/latinfinance/200804
https://www.nxtbook.com/nxtbooks/latinfinance/200803
https://www.nxtbookmedia.com