After the recent events in the U.S., Standard and Poor's has said Brazil, Costa Rica and Panama stand to suffer the most economic risk, while Chile will likely be the most stable in the region

In a teleconference last week, S&P announced that spreads in the Latin American region have widened since the attacks on Washington and New York. The rating agency has also noted that relative to their official reserves Brazil, Costa Rica and Panama have the largest growth in external borrowing needs for next year and are therefore the most exposed to the difficult market environment that lies ahead for the next two or three quarters.

"It's going to be a difficult year for Brazil with respect to the market since the economy has and continues to slow," said Jane Eddy, sovereign analyst at S&P. "It's a presidential year and maintaining the type of balance that they need to keep debt from increasing is difficult."

According to S&P, Panama also has a large external debt for next year. Furthermore, the debt is coupled with a simultaneous concern that the government, which is not politically cohesive, will not be able to push through the necessary reforms needed to handle the global economic slowdown as well as the slowdown in Panama. "It's a combination of the policy problems and the size of the refinancing need for next year," Eddy said.

And finally, Costa Rica also has large financing needs, relative to their reserves. "Costa Rica has an external financing need of $3 billion for public and private sectors and their official reserves are about $1.3 billion so relative to their hard currency reserves they have a large financing need," Eddy said.

On the brighter side of the market, Chile, rated A- by S&P is said to be the country in the region that will be most stable and most likely to withstand hard times. Although the currency has weakened a bit, its spreads have remained stable and failed to rise with the Argentine risk or the terrorist attacks. "Chile generally has a fairly deep domestic market and their financial position tends to be the strongest as evidenced by the fact that they are the strongest-rated entity in Latin America for quite a long stretch. They should be the best able to deal with the bumps in the market and with the economic downturn," Eddy said.

Subscribe Now

Access to a full range of industry content, analysis and expert commentary.

30-Day Free Trial

No credit card required. Access coverage of the securitization marketplace, including breaking news updated throughout the day.