This website uses cookies to ensure you have the best experience. Learn more

Risk Seekers Turn To Latin America Bonds

622 words - 3 pages

Many investors are looking towards some South American countries, some of which still branded pariahs, since developed markets are offering measly returns. Two countries that are receiving a large amount of attention are Venezuela and Argentina, who have pushed yields to new lows, making issuances increasingly attractive. Additionally, Ecuador’s President Rafael Correa is planning to release the country’s first international bond since he voluntarily defaulted on $3.2 billion around five years ago.
Argentina is not expected to be issuing new foreign debt before resolving a legal dispute with “holdout” creditors who refused restructured debt after the 2001 default. Although it is facing this problem, the government has admitted it received loan proposals from international investment banks, such as a $1 billion loan from Goldman Sachs. The initial investor interest in Argentina was revealed when an oil company, YPF, ...view middle of the document...

Furthermore, carry-trade, which is when investors borrow money at low interest rates to invest in higher yielding assets, has returned to fashion. This is certainly the case in Venezuela, where there is are rates that are close to zero. For example, Venezuelan state oil company PDVSA’s bonds maturing in five months yield double-digit returns.
An important thing that many investors seem to be forgetting is how high the risk is in the debt for these countries. The appetite for the debt from countries like Argentina, Venezuela and Ecuador are prompting concerns that investors are underestimating some of the risks. All of these countries have considerable macroeconomic imbalances and are dependent on natural resources as the commodities “super cycle” comes to an end. The head of Latin America strategy at Jefferies, Siobhan Morden, is concerned about asset price inflation in Argentina, which is struggling to avert a balance of payments crisis as central bank reserves plumb seven-year lows. She also goes to say that although bond prices have rallied due to market-friendly economic policy changes, such as devaluation, raising interest rates, phasing out expensive subsidies and releasing a new inflation index, they do not take into account the danger of a technical default if the “holdouts” secure a favorable ruling in the US Supreme Court.
In the case of Ecuador, which declared some of its foreign debt “illegitimate” in 2008, analysts say it may secure interest rates on new debt of as much as $700 million. Consequently there are concerns that growing fiscal and current account deficits will slowly eat away at the country’s capacity to pay its debt in the long term.
Overall, there is somewhat of a credit bubble forming in these Latin America countries, there is a large amount of doubt as to how long this rally will continue. As mentioned above, there is a huge possibility for gains in the debt markets, but associated with these gains is a large amount of risk. With not only legal and economic problems, the markets are as risky as ever, which may attract investors looking for high returns, but many fail to estimate just how much of a risk is being taken.

Find Another Essay On Risk Seekers Turn to Latin America Bonds

Using one case in Latin America, illustrate what the biggest obstacle to democracy is.

2390 words - 10 pages , Argentina suffered the same fate as many other countries did in this respect. After the Spanish had left the attempt to establish a united nation proved a difficult task for Argentine nationals; approximately 50 years of bloody civil war ensued shortly after the Spanish had vacated the country. Caudillismo may be one of the causes, it is a Latin American phenomenon and this fact alone arguably carries a lot of weight in the discussion of why democracy

An analysis of seemingly imperialistic behavior by the United States in Latin America (late 1800's); was the US guided by economic or political incentive to intervene?

789 words - 3 pages ). Here again, American policy changed the fundamental economic structure of Cuba.Williams said, "Adams insisted that expansion was the key to the wealth and welfare and concluded that the United States would stagnate if it did not consolidate its position in Latin America" (33). The U.S. did more than consolidate their position. They attempted to control Latin America with an economic philosophy driving them along. Whether this philosophy in the long run succeeded in improving America is a story still unfolding, as our involvement still continues, especially Mexico. The past has affected the current and the future is still to be told.

Cash Crops: The Devastation of Latin America. L.A.contains two valuable commodities,one being cocaine,and sugar, the people will continue to suffer due to the lack of distribution of wealth

1118 words - 4 pages money and they take it. Once the money starts coming in it is hard for them to turn away from it. Cocaine brings so much money for these countries that it will probably never stop being produced. As long as the number of consumers for this product continues to remain in the millions the supply of cocaine will surely flow.Although Latin America contains two valuable commodities, one being an illegal nar-cotic, cocaine, and sugar, the people will

A Review of Responses to the National Endowment for the Arts Report, “Reading at Risk: A Survey of Literary Reading in America”

2290 words - 9 pages warrant special concern, suggesting that – unless some effective solution is found – literary culture, and literacy in general, will continue to worsen. Indeed, at the current rate of loss, literary reading as a leisure activity will virtually disappear in half a century. (NEA, “Reading at Risk”) In recent years, access to the Internet has become available to Americans of all ages and cultural backgrounds. Some authority figures in academia

Is Democracy Sustainable in Latin America?

1697 words - 7 pages Is Democracy Sustainable in Latin America? In order to determine if democracy is sustainable in Latin America, it is important to understand or at least have an idea of what democracy is. There are several types of democracy and each is different. According to the English dictionary, democracy is “ a government by the people; especially: rule of the majority by a government in which the

Bonds and the Bond Market

3860 words - 15 pages sold out of your bond for an even greater return. You must also realize that the large difference between bonds and stocks is not fairly represented as well. Although the stocks show a $79 750 increase over the inflation rate, you must keep in mind that stocks carry a lot more risk than bonds do; this volatility could lead to an enormous loss in money if your money is not invested in the right companies.Let us now examine the various types of

“Why we as Australians shouldn’t be so opposed to asylum seekers.”

1002 words - 5 pages country, but now we’ve undone all of that hard work by deciding to turn back the boats. However, by doing this, we’ve not only been called racists, but we’ve also broken international human rights laws that we swore not to break with the UN, severed relations with other countries, and pushed many of these innocent asylum seekers to the brink of suicide. We’ve recently decided to do one of two things with asylum seekers: The first thing we’re doing

The Latin American Debt Crisis

2642 words - 11 pages need to borrow money to make more money so they continued to borrow. Instead of noticing the problem, banks kept lending money to Latin America because of the possible profit they would gain; many banks increased their loans to almost 50% more in the years closest to the crisis and in turn putting themselves at risk (Ocampo). However, even though the risks were there and people noticed them, the markets themselves were not showing signs of danger at

The History of Latin Music

672 words - 3 pages happened. This essay is going to be about the History of Latin music and how it has become very popular in America and the World. Latin music history began with one of the most influential and indigenous people, who loved to create music with “wind and percussion instruments”, and they the Mayans. Originally the wind and percussion instruments were made to copy and remake the music of the Europeans. There was a lot of other cultures, which used

AN ANALYSIS OF THE EMERGING BOND MARKET

1841 words - 7 pages bond market has grown from 3.2% in 1995 to 7.9% in 2006. The largest emerging bond market is in Asia. Asian bonds countries constitute 50% of the emerging bond markets. Latin America has 30% and the rest of the countries in the world share 20% amongst themselves.The tradable percentage of total emerging bonds outstanding increased from 75% in 1995 to 80% in 2000. Tradable emerging market bonds are valued at approximately $3.59 trillion at the end

My Neutral Terms

1049 words - 5 pages different. Just like an African and an American person can be two total opposite people does not mean they can not be friends, and this is one of the things I learned from the single stories. I also realized America can be very rude and ignorant to other countries in general. Latin America. also another continent that seems like an amazing place, and most people turn it down due to stereotypes and their perceptions on Mexico. Many people only focus on

Similar Essays

The Cuban Embargo: The United States’ Key To Latin America

1834 words - 7 pages After the 9/11 terrorist attacks, American foreign policy shifted from Latin America to the Middle East. This new focus meant that critical issues in Latin America were ignored, such as the Cuban embargo. The United States’ economic sanctions against Cuba have resulted in a degraded quality of life. Cubans lack access to basic goods and services. Additionally, the embargo has decreased the United States’ ability to exert its influence in the

Four Approaches To The Political Economy Development Of Latin America

1559 words - 6 pages the economic and class history, and its relation with one of the principal characteristics of Latin American countries: the disparity between the wealthy and the poor. Throughout this work, I intend to summarize and review four of the most representative theories that have helped shape the study of the economic development of Latin America: Hegemonic Stability, Dependency, Class Analysis and Neoliberalism. The need for a more accurate

Life In Latin America Prior To European Contact

1077 words - 5 pages Before Europeans came to Latin America there was civilization taken by the Olmec, Inca, Maya, and Aztec. The Olmec carved ceremonial heads that meant a lot to their culture representing their gods. The Inca had a very advanced civilization; they were home to builders and engineers and built Macchu Picchu. They Maya became the powerhouse of all the civilizations after Tikals’ success from conquering surrounding areas. The Aztec were very

Using One Case In Latin America, Illustrate What The Biggest Obstacle To Democracy Is

1159 words - 5 pages Using one case in Latin America, illustrate what the biggest obstacle to democracy is. A history of militarism and colonialism are the biggest obstacle to democracy in South America. Using the case of Argentina, this paper will be discussing how its famous history of militarism and consequent military rule has undermined the concept of a democracy. I will then go into detail about the certain aspects of military rule, ( ‘The Dirty War’, gross