For 2003, Latin America's cross-border enthusiasts have their sights trained on financial future-flows in Brazil, known as MT-100s. Barring a sustained war with Iraq, market watchers foresee a busier year than election-marred 2002, particularly for transactions backed by trade-related payment rights. "It's going to take a bit more time, but I believe from March onwards, we're going to see deals," said Delcio Blajfeder, general manager of debt capital markets at Banco do Brasil.

A trinity of major domestic banks - Banco Itau, Unibanco and Banco do Brasil - put out a handful of deals in 2002. Though the sector far outpaced others out of Brazil, it still suffered from the sour mood surrounding elections in October. More recently investors have been easing up on President Jose Inacio Lula da Silva. "Up to now the signs are good, he appears to be doing what the market thinks is important," said Carlos Alberto Martins, deputy director of structured finance at BankBoston Brazil.

Banco do Brasil, for one, is pushing ahead a novel plan to securitize payments originated outside the U.S. These amount to US$3.5 billion to US$4 billion annually if only dollar-denominated transfers are taken into account, according to Blajfeder. The lion's share of these flows represent payments to Brazilian exporters. "We're discussing this internally and, as soon as we have approval from the board, we'll invite banks for their proposals," Blajfeder said. Brasil, he added, intends to move on this program before reopening the existing one. To date, the bank has placed US$790 million in MT-100s. The bank broke out the first Brazilian MT-100 in the summer of 2001. Sized at US$300 million, that deal securitized remittances from Brazilians working in Japan and priced at 7.99%. Merrill Lynch was the underwriter.

The sector's inaugural bank was also the last one to eke out a deal before the market turmoil over elections went from uncomfortable to vertiginously terrifying. In mid-September, Brasil closed a US$40 million, seven-year MT-100. Led by ING Financial Markets, that deal was rated Baa1' and was reportedly sold exclusively to Teachers Insurance and Annuity Association and its affiliates.

Under the balmier political climate, players are moving. Apart from Banco do Brasil, Santander is heard sniffing around for deals to structure and drop into its own conduit. The bank will likely offer up collateral as well, but not yet.. Santander is still working through its recent acquisition of Banespa and it will take another year before the combined stats on financial flows are clear enough to justify a deal, said a source at the Spanish bank.

Banco Bradesco, whose hard-charging drive on other fronts - it recently acquired an asset manger from JPMorgan for R$7 billion (US$ 2 billion) - may bode well for a more aggressive push in putting up collateral for deals. The bank has fallen behind its peers in securitizing financial flows, even though its flows are appreciable, sources said. "They all have capacity for future issuance, it just depends on if and when they need it," said Gary Kochubka, director of structured finance ratings at Standard & Poor's.

He noted that the financing appetite among Brazilian exporters is hearty and many are truffling around for funding. A pickup in activity will generate more collateral for MT-100s.

Smaller banks may get into the act as well, sources say, though a strong tone would have to hold for a sustained period for the more timid banks to come out.

One lingering curb on the sector is the narrow access to monoline insurers, sources said. The word in the market is that only MBIA is interested in taking on more Brazil deals in the foreseeable future. For the sector to truly pick up, some transactions will need to be loaded with other enhancements.

As for novelty in asset type, the sector is expected to cling to trade-related finance, which overshadows other securitizable financial flows in the country. "The only thing that will have a little wrinkle in it is the new Banco do Brasil program," said one New York banker.

Typically in an MT-100, a bank holds the payment for at least a couple of days if not several weeks. "Some exporters want to amass the flows in order to get a better exchange rate," Kochubka said. The banks securitizing those payments "are playing the arbitrage game not only with the foreign exchange difference but with their earnings as they hold the funds."

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