Last week, LatAm players assembled for what's become a requisite chatfest for anyone who's serious about this market. Euromoney and LatinFinance held their sixth annual Securitization in Latin America Summit in Miami, attracting more than 300 attendants, more than at any other time, and over triple the number of a few years ago.
What's changed? From the first meeting in 2002, basically everything. Severe volatility around Brazilian elections and the aftermath of Argentina's devaluation had tightened the screws on the cross-border market, and the domestic markets in the largest countries were one part action and nine parts talk.
In 2002, the key words were "nasty" and "ugly."
Now I heard "strong," "resilient," "opportunities," and the boldest one of all: "different," as in: "We're in a different era right now," a statement delivered by Fitch Ratings' Greg Kabance and seconded by others.
This "different" isn't so much about the abundant liquidity out there, the easy money that has squeezed spreads so tight that in the case of CDS for LatAm borrowers, they "really have nowhere to go," according to Merrill Lynch's Michael Lucente. The "different" is about the expansion of the domestic markets and improved creditworthiness of key countries, particularly Mexico, which is investment grade, and Brazil, which, in the eyes of many, will get there. (At press time Standard & Poor's had nudged the country to within a rung of investment grade; Fitch had done the same a week earlier.)
LatAm originators now have more funding options at home, in local currency. In the two largest countries, a growing pool of capital can absorb the kinds of volumes that would once have overwhelmed them, although part of this is a function of the global liquidity bonanza.
The idea is that, with more and more domestic capital tied up in ABS and MBS, foreign money can't make or break LatAm structured finance in Mexico and Brazil the way it used to.
The risk of some degree of reversal is there, especially if global liquidity dries up, but participants were hard-pressed to think up potential scenarios akin to the 1994 Tequila Crisis or 1997 Asian Crisis.
Then again, who saw those coming?
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