Latin America

Martín Guzmán, Argentina’s finance minister, said on Friday afternoon that the country was “ready to intensify interaction” with international bondholders ahead of a debt restructuring. But with authorities set to announce further spending to protect its people from the economic impact of Covid-19, the IMF echoed the government’s view that a fiscal surplus was unfeasible in the short term.

Colombia’s Ecopetrol became the first of Latin America’s big national oil companies to launch an action plan to combat the continued fall in oil prices as it looks to preserve cash.

Emerging market bond conditions got worse and worse this week as investors struggled to sell bonds quickly enough to keep up with outflows. Though some investors said they had lined up a shopping list of cheap purchases, it could be some time before they decide to pounce.

Even the top-rated emerging markets corporates are mostly preferring to keep cash on hand rather than take advantage of a sharp fall in bond prices to repurchase debt cheaply, bond bankers said this week.

Latin American governments looking to shore up their economies in the fact of the coronavirus pandemic generally have less room for fiscal stimulus than they did before the 2008 financial crisis, warned Fitch Ratings on Wednesday as the region’s bond markets plunged even further.

Colombia’s Ecopetrol became the first of Latin America’s major national oil companies to launch an action plan to combat the continued fall in oil prices as it looks to preserve cash.

Latin America bond issuers and investors were thrown deeper into the coronavirus crisis on Monday, with Friday’s spread tightening more than cancelled out as the US Federal Reserve’s surprise 100bp rate cut on Sunday failed to arrest a fall in risk assets.

Though Latin American bonds offered some consolation to investors on Friday, the relief is likely to be short-lived as the region buckles down to fully face the effects of the coronavirus pandemic.

A sharp sell-off in Argentina’s international bonds is likely to have a major impact on the government’s attempts to restructure nearly $70bn of debt, but there was disagreement as to whether lower secondary prices would make life harder for the borrower.

One of the worst ever weeks in markets spared no asset class, and investors warned that Latin America’s mostly commodity-oriented economies were in a particularly bad spot as the region’s oil producers led EM losses in both corporates and sovereigns.

President Lenin Moreno’s announcement of austerity measures that could raise $2.25bn, as well as the possibility of cheaper bank loans, was not enough to stop Ecuador’s bonds plunging towards the 40 mark as oil prices fell further on Wednesday. But the sovereign is expected to make a $350m coupon payment on March 24 and some are seeing signs of encouragement in the government’s reaction.

Moody´s slashed Bolivia’s credit rating from Ba3 to B1 and placed its outlook on negative as it warned of a “material erosion” of the landlocked country’s fiscal and foreign exchange reserve buffers in recent years.