The Guide To Latin American Local Debt Markets

Capital markets, both for debt and equity securities, have allowed firms to secure funding for productive uses while providing investors with opportunities for portfolio diversification. The importance of capital markets for the development of economies and for the betterment of society cannot be overstated. This is just as true in emerging economies with free markets, such as those found in Latin America, as it is in developed markets. However, capital markets in the region are not being utilized to the fullest. The idea behind this collection of articles is to offer a primer on the development of local capital markets in several select countries in Latin America. We discuss not only their history and current status but also their future. To this end, seven authors contributed to this project, each writing about one of seven countries: Argentina, Brazil, Chile, Colombia, Mexico, Peru, and Uruguay. Each author decided which issues they believe matter most to the progress of their local capital markets. Some authors chose a qualitative and institutional description of local markets, whereas others adopted a more quantitative approach.

Developing local bond markets is high on the policy agenda of Latin America. This book's case studies of Argentina, Brazil Chile, Columbia, Mexico and Uruguay, written by country experts follow a common methodology, with each offering a history of that country's bond market development and data sets.

This paper overviews patterns in bond issuance in local and external markets by firms in six large Latin American countries. Data suggest that despite rising issuance, local markets remain small and shallow in several countries. Nevertheless, since greater funding is available to many firms in both markets, we investigate the factors that may explain the firm’s choice on where to issue a bond. Using an unbalanced panel of firm and market-level indicators for years 1995-2015, we control for variables representing several theories of capital structure, and the results show that firm characteristics such as size and liquidity increase the likelihood of firms to issue externally. With respect to market characteristics, the market completeness hypothesis generates the most support, where market scale and depth are most important for the issuer’s choice of the market, suggesting that local markets will have to become deeper to draw more firms and investment.

Despite exhibiting remarkable growth, the green bond market still represents less than 1 percent of the global bond market. This paper identifies two challenges that might slow the adoption of green bonds and presents a menu of responses that policymakers, regulators, and public financial institutions can use to offset these challenges. Specifically, it explores two key dimensions: (i) the risk profile of the green bond instrument and (ii) the transaction costs associated with issuance of and reporting on green bonds. New approaches to risk design and technology-based approaches are essential to untap the potential of green bond markets, particularly in Latin America and the Caribbean and other developing regions. The incorporation of financial mechanisms such as covered bonds and guarantees can adequately address the risk of the issues, making the market more attractive for investors. Enhanced regulation and education and leveraging efficiencies of new technologies such as distributed ledger technologies can substantially reduce monitoring and reporting costs, while improving transparency in the use of proceeds and market integrity.

The Latin American Economic Outlook 2021: Working Together for a Better Recovery aims to analyse and provide policy recommendations for a strong, inclusive and environmentally sustainable recovery in the region. The report explores policy actions to improve social protection mechanisms and increase social inclusion, foster regional integration and strengthen industrial strategies, and rethink the social contract to restore trust and empower citizens at all stages of the policy‐making process.

A major, new, and comprehensive look at six decades of macroeconomic policies across the region What went wrong with the economic development of Latin America over the past half-century? Along with periods of poor economic performance, the region’s countries have been plagued by a wide variety of economic crises. This major new work brings together dozens of leading economists to explore the economic performance of the ten largest countries in South America and of Mexico. Together they advance the fundamental hypothesis that, despite different manifestations, these crises all have been the result of poorly designed or poorly implemented fiscal and monetary policies. Each country is treated in its own section of the book, with a lead chapter presenting a comprehensive database of the country’s fiscal, monetary, and economic data from 1960 to 2017. The chapters are drawn from one-day academic conferences—hosted in all but one case, in the focus country—with participants including noted economists and former leading policy makers. Cowritten with Nobel Prize winner Thomas J. Sargent, the editors’ introduction provides a conceptual framework for analyzing fiscal and monetary policy in countries around the world, particularly those less developed. A final chapter draws conclusions and suggests directions for further research. A vital resource for advanced undergraduate and graduate students of economics and for economic researchers and policy makers, A Monetary and Fiscal History of Latin America, 1960–2017 goes further than any book in stressing both the singularities and the similarities of the economic histories of Latin America’s largest countries. Contributors: Mark Aguiar, Princeton U; Fernando Alvarez, U of Chicago; Manuel Amador, U of Minnesota; Joao Ayres, Inter-American Development Bank; Saki Bigio, UCLA; Luigi Bocola, Stanford U; Francisco J. Buera, Washington U, St. Louis; Guillermo Calvo, Columbia U; Rodrigo Caputo, U of Santiago; Roberto Chang, Rutgers U; Carlos Javier Charotti, Central Bank of Paraguay; Simón Cueva, TNK Economics; Julián P. Díaz, Loyola U Chicago; Sebastian Edwards, UCLA; Carlos Esquivel, Rutgers U; Eduardo Fernández Arias, Peking U; Carlos Fernández Valdovinos (former Central Bank of Paraguay); Arturo José Galindo, Banco de la República, Colombia; Márcio Garcia, PUC-Rio; Felipe González Soley, U of Southampton; Diogo Guillen, PUC-Rio; Lars Peter Hansen, U of Chicago; Patrick Kehoe, Stanford U; Carlos Gustavo Machicado Salas, Bolivian Catholic U; Joaquín Marandino, U Torcuato Di Tella; Alberto Martin, U Pompeu Fabra; Cesar Martinelli, George Mason U; Felipe Meza, Instituto Tecnológico Autónomo de México; Pablo Andrés Neumeyer, U Torcuato Di Tella; Gabriel Oddone, U de la República; Daniel Osorio, Banco de la República; José Peres Cajías, U of Barcelona; David Perez-Reyna, U de los Andes; Fabrizio Perri, Minneapolis Fed; Andrew Powell, Inter-American Development Bank; Diego Restuccia, U of Toronto; Diego Saravia, U de los Andes; Thomas J. Sargent, New York U; José A. Scheinkman, Columbia U; Teresa Ter-Minassian (formerly IMF); Marco Vega, Pontificia U Católica del Perú; Carlos Végh, Johns Hopkins U; François R. Velde, Chicago Fed; Alejandro Werner, IMF.

This guidance note was prepared by International Monetary Fund (IMF) and World Bank Group staff under a project undertaken with the support of grants from the Financial Sector Reform and Strengthening Initiative, (FIRST).The aim of the project was to deliver a report that provides emerging market and developing economies with guidance and a roadmap in developing their local currency bond markets (LCBMs). This note will also inform technical assistance missions in advising authorities on the formulation of policies to deepen LCBMs.