NEW YORK - With it's unfinished story of Alejandro Toledo versus Alan Garcia in the upcoming presidential elections, Peru is currently the most captivating story for industry players, said one panel member at the Latin American forum hosted by Standard & Poor's last week.

Garcia, who was president in the 1980s, is said to have damaged the country's economy. He's back and charming the country once again.

With the second place spot for the upcoming presidential election, Garcia says he has changed, though the mere thought of his presence in the government has sent a ripple of disgust and fear to foreign investors. One source commented, "It shows how whimsical things are. He ran the country into the ground, went into exile for nine years, comes back sweet talking and gets the second place slot."

Clearly, foreign investors are rooting for Toledo, though a surety source said, "There is a fair amount of uncertainty in the market and uncertainty is not welcome by rating agencies, and bond markets, etc. Garcia has a poor record historically for the international investors, so the prospect of him winning is making the market a bit jittery."

Uncertainty seems to be the key word in this situation. At the S&P forum, the panelist said there are many unanswered questions. The most obvious: Is Garcia a changed man? What kind of policy would Toledo or Garcia implement? What has the public said by allowing Garcia to maintain the second place slot?

The panelist said, "The public did not reject the model, they have rejected the second Fujimori. The public is rejecting everything about Fujimori. It's dangerous just to read the headline and assume it's all downhill from there."

That said, it is obviously difficult to predict what will come of the developing securitization market. Some sources, such as Roger Scher, sovereign analyst at Fitch, say a lower rating may be just the incentive needed to get issuers to look at securitization as an alternative source of funding. However, the difficulty of completing structured transactions in a lower rated country is much greater. "I would say there's a potential for clever investment bankers to be talking to various entities in Peru and suggesting securitizations," Sher said.

On the other hand, another source disagreed, saying that the uncertainty will slow the development of secuitizations because investors will be reluctant to invest in Peru. All in all, it's a wait and see situation.

The S&P forum also touched on sovereign, corporate and structured finance trends in Latin America.

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