Brazil issued its first global bond in its own currency this week, attracting $1.5 billion from overseas investors and helping to reduce the mismatch between its Real assets and its dollar liabilities.
There was $7 billion worth of demand for the bond, which was priced to yield at 12.75% with a coupon set at 12.5%.
'Devaluation of the Brazilian Real would have to be very significant for investors to not make a return,' says Ricardo Amorim, head of Latin America research for West LB in New York.
The bond issue could be part of a historic shift away from commercial bank lending and towards bonds issued on the domestic markets that may diminish the old phantom of debt. Commercial bank lending now makes up a smaller proportion of total Latin borrowing.
'We are witnessing a transformation of debt management,' says Fernando Losada, head of emerging markets research for ABN Amro in New York.
The trend toward issuing debt in local currency began in Colombia in December 2004 with its Global TES (Treasury Securities) bond.
Latin American credit ratings reflect the improved fundamentals: ten years ago the average rating in the region was B, and today the average is BB or BB+ despite the largest debt default in history by Argentina two years ago.
The region's economies remain tightly managed, solvent and on a roll, fuelling optimism. But employment is not growing fast enough to absorb the expanding workforce, and structural changes that would improve quality of life for the massive lower class are very slow in trickling down.
Local currencies are robust and trade balances are soaring exports will surpass $500 billion annually in the next year. Inflation is declining to below 6% on average, interest rates are low and falling in many countries, importantly in Brazil. Even a simmering political scandal in Brazil and Argentina's continuing debt saga are not dampening the economic outlook, analysts say.
Yet, aside from Chile, Latin America has made little progress in attacking its historic legacy of poverty and inequality. Most of the region has not made needed improvements in education, health, technology and infrastructure.
'Latin America is trapped in a low growth situation,' says Peter Hakim, president of the Inter-American Dialogue, a policy research centre in Washington DC. 'This is the best international climate in 25 years and all they can manage is 5% growth.'
Growth across the region will fall by more than 1.5% this year from last year's record high of 5.9%. It will close the year at 4.3% and drop further to below 4% next year, according to market estimates. This is due to continued high oil prices and a slowing of recent spectacular growth rates in recovering countries such as Argentina.
High international oil prices are not a threat for Latin America as a whole, because many nations are net exporters and Brazil is virtually self-sufficient in petroleum. The region's energy importers Chile, Panama and Central America are struggling with oil prices but their economies continue to grow.