LatinFinance - Special Edition - August 2013 - 10

are rated triple-B or higher.
freer markets and stronger
rule of law were also critical
in paving the way for capital
markets for both debt and
equity to develop, says Roberto
D’avola, head of latam Dcm at
JPmorgan.
that is not to say that only
the strongest countries can tap
debt markets: single-B rated
Honduras sold its debut dollar bond in march, a couple of
months after double-B Paraguay pulled a similar trick. nevertheless, volatile economic
policies and debt management
strategies in countries such as
argentina, ecuador, Bolivia,
Belize, and Venezuela generate
worries among some international investors looking at latin
america.
ecuador, for example, was
stymied by a history of default
– in 1999, it called for renegotiations on its Brady Bond debt
only to default again in 2008
– when in mid-2013 it considered a bond market return.
and argentina has spent more
than a decade wrangling with
global investors after stopping
payment on $144 billion of debt
in 2001.
“this can lead to the perception the entire region is a
political mess,” craige says.
“the reality is these countries
are outliers. argentina will
continue to blame others for
their problems 20 years from
now, but for every argentina
we have Peru, Panama, colombia and a host of others that
took the responsibility upon
themselves to address their
debt overhang, high inflation
and sub-par growth to become
investment grade. they will
continue to prosper as a result.”
Penelope foley, co-manager
of the tcW em fund which
has $130 billion of assets under
management says: “the big
change from the last 10 years,
and for the next 10, is the
recognition that emerging markets as a class will not lock-step
together as a unit.”

Sovereign Deal of the Quarter Century

United Mexican States
Brady Restructuring, 1989
in what he calls a “productive exchange” that took nearly a year to complete,
former finance minister Pedro aspe, under then mexican president carlos
Salinas, credits teamwork between mexico and the US treasury for reaching latin america’s first Brady bond restructuring. Under the finalized Brady
agreement, banks holding $48.1 billion in medium and long-term commercial
public debt converted those obligations using one or a combination of options
involving haircuts on principal or interest.
the Brady bond exchange is our sovereign deal of the quarter century for its
extraordinary size, the precedent it set for others and, arguably, for marking
an end to latin america’s lost decade. many more latin sovereigns followed,
with the Brady bonds’ long tenors granting them respite from intense debt
servicing schedules, and the space necessary to fix fundamental economic
problems.
aspe says the restructuring experience taught mexico that governments
should never allow their economies to reach such high levels of indebtedness.
and it served a good lesson to banks that sovereign debt is complicated.
“the US and mexican treasuries came out with a plan that was successful,”
says aspe. “and that success meant that the other countries joined. mexico
paid all of its Brady bonds and the mexican economy looks much better. We
learned the hard way, but that was the true origins of why we have an open
economy, nafta and an independent central bank.” LF
Two giants
as the emerging market investor base deepens, portfolio
managers are taking a closer
look at the differentiating factors between latin america’s
sovereign borrowers. the
region’s two largest economies,
mexico and Brazil, are examples of countries heading in
different directions.
“mexico began a very strong
reform momentum,” says marcela meirelles at tcW. “Brazil
unfortunately is going through
ad hoc measures focused on
boosting consumption and has
more underlying obstacles for
higher growth rates. these are
two different extremes on how
proactive the governments
have been.”
commodity exports to
china have supported a number of economies over the past
decade. those countries – such
as Brazil – are likely to feel the
effects of lower demand as
china’s growth moderates.
“Some countries have been
lucky. and other countries
have been working hard to

10 l atinfina nce.com - 25 Years - August 2013

improve fundamentals,” says
michael chamberlin, executive director of the emerging
markets trade association, and
a former partner at law firm
Shearman & Sterling, where
he worked on mexico’s Brady
bond debt rescheduling.
But those that did the best
were also those that worked
hard at reforming their economies and legal infrastructure.
“it is important to look at
what latin american countries
have done to improve fundamentals,” says Uruguay’s debt
management head azucena
arbeleche.
“We have been favored by a
lot of liquidity, but some countries have done reforms and
have improved their fundamentals,” she says.
“latam countries can offer
good quality paper. at the
same time latam investors
increasingly demand assets in
which to allocate their pensions fund savings. We have
already seen an increase in
cross-border investment from
pension funds and insurance

companies in latam.”
Sovereign funding has
moved from bank loans to
bonds over the last quarter
century. With that, new frameworks for crisis resolution are
emerging, arbeleche says. She
highlights renewed focus
on the role collective action
clauses (cacs) could play
in resolving sovereign debt
problems.
the most important of
these is the majority-restructuring clause, by which a qualified majority of bondholders
can vote to alter the payment
terms of the bond and make
these changes binding even for
dissenting bondholders.
aspe says reform is a process that takes decades and
is ultimately influenced by
the politics and culture of the
country in question. His advice
to latin america’s emerging
markets: patience and consistency. “there will be fruit,
but the harvest will not come
tomorrow. Sometimes it comes
five to 10 years [after planting
the seeds].” LF


http://LATINFINANCE.COM

LatinFinance - Special Edition - August 2013

Table of Contents for the Digital Edition of LatinFinance - Special Edition - August 2013

Latin Finance - Special Edition - August 2013
The Evolution of the Markets 1988-2013
The Future of Latin Finance
"Twenty-five Years Ago, LatinFinance Was Launched With One simple, if Well-worn, Belief: That Crisis Inevitably Gives Way to Opportunity"
Evolution of the Markets & Deals of the Quarter Century
Turnaround Time, for Some
Rising Champions
Locals Wanted
Gaining Pace
A Question of Depth
The Public-Private Balance
Cheaper Borrowing
Keeping It Simple
Local Banks Are Increasingly Stepping Up the Latin League Tables
LatinFinance Charts a Quarter Century of Change for the Biggest Banks in Latin America
LatinFinance Picks Out the Major Turning Points in the Region’s Political, Economic and Financial History Over the Past 25 Years
Governance & Reform
President, Mexico
Former President, Brazil
“the Government Has Not Given Up on What Is Fundamental. but When It Comes to Improving The Lives of Brazilians, There Are Signs It Has Started To Weaken"
Former President, Colombia
Opposition Leader, Venezuela
Former Us Treasury Secretary
Stability & Regulation
Governor, Bank of Mexico
“Latin America Did Very Well During the 2008 Crisis. but It’s Also True That a Lot of Ammunition Was Used”
Chairman, Grupo Financiero Banorte
Former Vice-Chairman, Citigroup
Partner, Cleary Gottlieb Steen & Hamilton
Former Governor, Central Bank of Brazil
Former Governor, Central Bank of Venezuela
Former Governor, Central Bank of Argentina
Professor of Economics, Columbia University
Corporates & Capital
CEO and co-CIO, Pimco
CEO, Gávea Investimentos
Founder, Celfin Capital
With Joyce Chang, Richard Frank, Hari Hariharan, Hans Humes, Will Landers, Mark Mobius and Martin Schubert
CEO, Itaú-Unibanco
CEO, Grupo Sura
Chairman, Santander
CFO, América MóVil
Former CEO, Vale
Chairman, Roubini Global Economics
Growth & Development
Former President, Chile
President, CAF
President, IDB
Former President, IDB
Former President, Caribbean Development Bank
President, Centennial Group Latin America
A Look Into the Future With Alternate Visions of Latin America a Quarter Century From Now
LatinFinance - Special Edition - August 2013 - Latin Finance - Special Edition - August 2013
LatinFinance - Special Edition - August 2013 - Cover2
LatinFinance - Special Edition - August 2013 - The Evolution of the Markets 1988-2013
LatinFinance - Special Edition - August 2013 - The Future of Latin Finance
LatinFinance - Special Edition - August 2013 - 3
LatinFinance - Special Edition - August 2013 - "Twenty-five Years Ago, LatinFinance Was Launched With One simple, if Well-worn, Belief: That Crisis Inevitably Gives Way to Opportunity"
LatinFinance - Special Edition - August 2013 - 5
LatinFinance - Special Edition - August 2013 - Evolution of the Markets & Deals of the Quarter Century
LatinFinance - Special Edition - August 2013 - 7
LatinFinance - Special Edition - August 2013 - Turnaround Time, for Some
LatinFinance - Special Edition - August 2013 - 9
LatinFinance - Special Edition - August 2013 - 10
LatinFinance - Special Edition - August 2013 - 11
LatinFinance - Special Edition - August 2013 - Rising Champions
LatinFinance - Special Edition - August 2013 - 13
LatinFinance - Special Edition - August 2013 - 14
LatinFinance - Special Edition - August 2013 - 15
LatinFinance - Special Edition - August 2013 - Locals Wanted
LatinFinance - Special Edition - August 2013 - 17
LatinFinance - Special Edition - August 2013 - Gaining Pace
LatinFinance - Special Edition - August 2013 - 19
LatinFinance - Special Edition - August 2013 - 20
LatinFinance - Special Edition - August 2013 - 21
LatinFinance - Special Edition - August 2013 - A Question of Depth
LatinFinance - Special Edition - August 2013 - 23
LatinFinance - Special Edition - August 2013 - 24
LatinFinance - Special Edition - August 2013 - 25
LatinFinance - Special Edition - August 2013 - The Public-Private Balance
LatinFinance - Special Edition - August 2013 - 27
LatinFinance - Special Edition - August 2013 - Cheaper Borrowing
LatinFinance - Special Edition - August 2013 - 29
LatinFinance - Special Edition - August 2013 - Keeping It Simple
LatinFinance - Special Edition - August 2013 - 31
LatinFinance - Special Edition - August 2013 - LatinFinance Charts a Quarter Century of Change for the Biggest Banks in Latin America
LatinFinance - Special Edition - August 2013 - G2
LatinFinance - Special Edition - August 2013 - G4
LatinFinance - Special Edition - August 2013 - G5
LatinFinance - Special Edition - August 2013 - 34
LatinFinance - Special Edition - August 2013 - 35
LatinFinance - Special Edition - August 2013 - 36
LatinFinance - Special Edition - August 2013 - 37
LatinFinance - Special Edition - August 2013 - 38
LatinFinance - Special Edition - August 2013 - 39
LatinFinance - Special Edition - August 2013 - 40
LatinFinance - Special Edition - August 2013 - 41
LatinFinance - Special Edition - August 2013 - 42
LatinFinance - Special Edition - August 2013 - 43
LatinFinance - Special Edition - August 2013 - 44
LatinFinance - Special Edition - August 2013 - 45
LatinFinance - Special Edition - August 2013 - 46
LatinFinance - Special Edition - August 2013 - 47
LatinFinance - Special Edition - August 2013 - Governance & Reform
LatinFinance - Special Edition - August 2013 - 49
LatinFinance - Special Edition - August 2013 - President, Mexico
LatinFinance - Special Edition - August 2013 - 51
LatinFinance - Special Edition - August 2013 - “the Government Has Not Given Up on What Is Fundamental. but When It Comes to Improving The Lives of Brazilians, There Are Signs It Has Started To Weaken"
LatinFinance - Special Edition - August 2013 - 53
LatinFinance - Special Edition - August 2013 - 54
LatinFinance - Special Edition - August 2013 - 55
LatinFinance - Special Edition - August 2013 - Former President, Colombia
LatinFinance - Special Edition - August 2013 - 57
LatinFinance - Special Edition - August 2013 - Opposition Leader, Venezuela
LatinFinance - Special Edition - August 2013 - 59
LatinFinance - Special Edition - August 2013 - Former Us Treasury Secretary
LatinFinance - Special Edition - August 2013 - 61
LatinFinance - Special Edition - August 2013 - Stability & Regulation
LatinFinance - Special Edition - August 2013 - Governor, Bank of Mexico
LatinFinance - Special Edition - August 2013 - 64
LatinFinance - Special Edition - August 2013 - B1
LatinFinance - Special Edition - August 2013 - B2
LatinFinance - Special Edition - August 2013 - 65
LatinFinance - Special Edition - August 2013 - Chairman, Grupo Financiero Banorte
LatinFinance - Special Edition - August 2013 - 67
LatinFinance - Special Edition - August 2013 - Former Vice-Chairman, Citigroup
LatinFinance - Special Edition - August 2013 - Partner, Cleary Gottlieb Steen & Hamilton
LatinFinance - Special Edition - August 2013 - Former Governor, Central Bank of Brazil
LatinFinance - Special Edition - August 2013 - Former Governor, Central Bank of Venezuela
LatinFinance - Special Edition - August 2013 - Former Governor, Central Bank of Argentina
LatinFinance - Special Edition - August 2013 - 73
LatinFinance - Special Edition - August 2013 - Professor of Economics, Columbia University
LatinFinance - Special Edition - August 2013 - Corporates & Capital
LatinFinance - Special Edition - August 2013 - CEO and co-CIO, Pimco
LatinFinance - Special Edition - August 2013 - 77
LatinFinance - Special Edition - August 2013 - 78
LatinFinance - Special Edition - August 2013 - 79
LatinFinance - Special Edition - August 2013 - CEO, Gávea Investimentos
LatinFinance - Special Edition - August 2013 - Founder, Celfin Capital
LatinFinance - Special Edition - August 2013 - With Joyce Chang, Richard Frank, Hari Hariharan, Hans Humes, Will Landers, Mark Mobius and Martin Schubert
LatinFinance - Special Edition - August 2013 - 83
LatinFinance - Special Edition - August 2013 - 84
LatinFinance - Special Edition - August 2013 - 85
LatinFinance - Special Edition - August 2013 - CEO, Itaú-Unibanco
LatinFinance - Special Edition - August 2013 - 87
LatinFinance - Special Edition - August 2013 - CEO, Grupo Sura
LatinFinance - Special Edition - August 2013 - Chairman, Santander
LatinFinance - Special Edition - August 2013 - CFO, América MóVil
LatinFinance - Special Edition - August 2013 - Former CEO, Vale
LatinFinance - Special Edition - August 2013 - Chairman, Roubini Global Economics
LatinFinance - Special Edition - August 2013 - Growth & Development
LatinFinance - Special Edition - August 2013 - Former President, Chile
LatinFinance - Special Edition - August 2013 - 95
LatinFinance - Special Edition - August 2013 - President, CAF
LatinFinance - Special Edition - August 2013 - 97
LatinFinance - Special Edition - August 2013 - President, IDB
LatinFinance - Special Edition - August 2013 - Former President, IDB
LatinFinance - Special Edition - August 2013 - Former President, Caribbean Development Bank
LatinFinance - Special Edition - August 2013 - 101
LatinFinance - Special Edition - August 2013 - President, Centennial Group Latin America
LatinFinance - Special Edition - August 2013 - 103
LatinFinance - Special Edition - August 2013 - A Look Into the Future With Alternate Visions of Latin America a Quarter Century From Now
LatinFinance - Special Edition - August 2013 - Cover3
LatinFinance - Special Edition - August 2013 - Cover4
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