Bond Markets in Latin America

Abstract

The first comprehensive examination of the importance of local bond market development in Latin America, with conceptual and comparative assessments, case studies of six countries, and new, unique data sets. Developing local bond markets is high on the policy agenda of Latin America. Bond markets are an essential component of a well-functioning financial market. Facilitating the efforts of public and private borrowers to issue domestic-currency-denominated, long-term, fixed-rate bonds insulates them from the rollover and balance sheet risks that have been central elements in past financial crises. In addition, a robust bond market is a way for nonfinancial firms to retain their capacity to borrow when the banking system grows reluctant to lend. Latin American bond markets are growing, and may even approach a “big bang”-like surge, although significant challenges remain. This first comprehensive examination of the importance of local bond market development in Latin America provides conceptual and comparative assessments, case studies of six countries, surveys of firms and investors, and a cross-country economic analysis of the determinants of bond market development. The book's case studies of Argentina, Brazil, Chile, Colombia, Mexico, and Uruguay, written by country experts, follow a common methodology, with each offering a history of that country's bond market development, a comprehensive and unique data set on both private and public bond markets, surveys of firms and investors, and (in many chapters) firm-level analysis. A Web appendix makes available the unique data sets, including results of specially designed surveys of firms and investors participants, used in the book's studies. ContributorsCamila Aguilar, Patrick Bolton, Eduardo Borensztein, Matías Braun, Ignacio Briones, Mauricio Cárdenas, Andre L. Carvalhal da Silva, Sara G. Castellanos, Kevin Cowan, Julio de Brun, Barry Eichengreen, Roque B. Fernández, Xavier Freixas, Néstor Gandelman, Herman Kamil, Ricardo P. C. Leal, Lorenza Martínez, Marcela Meléndez, Ugo Panizza, Sergio Pernice, Arturo C. Porzecanski, Natalia Salazar, Jorge Streb

Localising sovereign debt: The rise of local currency bond markets in sub‐Saharan Africa

“…Also, other than by taking 1-year lags, we do not address possible endogeneity problems, due to the difficulty of finding good instruments. Our results should hence not be interpreted as demonstrating causality, a caveat that also applies to earlier studies of LCBM development in SSA (Berensmann et al, 2015;Essers et al, 2016;Mu et al, 2013) and other regions (Bhattacharyay, 2013;Burger & Warnock, 2006;Claessens, Klingebiel, & Schmukler, 2007;Eichengreen, Panizza, & Borensztein, 2008). Nonetheless, we believe the econometric analysis that follows contributes to our understanding of SSA LCBMs and helps to lay the groundwork for better identification of causal relations as wider samples and longer time series become available.…”

Corporate debt maturity in developing countries: Sources of long and short‐termism

“…However, to the extent that these markets are already competitive in some countries, reducing the costs through government interventions could prove difficult. Another way to facilitate smaller, lower-rated firms to issue securities in capital markets could be to develop capital markets specialised in SMEs, innovative instruments (such as minibonds) and securitisation (Borensztein, Cowan, Eichengreen, & Panizza, 2008;Giovannini et al, 2015). But those solutions still need to be tested.…”

Public Debt as a Determinant of the Convergence of Bosnia and Herzegovina in the Eu Accession Process

“…According to Borensztein, Cowan, Eichengreen and Panizza (2007), crises that make access to external financing difficult and affect the development of the domestic financial market play an extremely large role. The increased use of external borrowing is also a consequence of attempts to create the best possible credit rating for the country, because with the country's exit to the international financial markets, audit firms create a country's credit rating that should contribute to attracting foreign capital and increasing foreign investments in the country.…”