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Latin America: Ten months good, two months bad...

...and what of 1998? Most of 1997 was a borrower's market in Latin America but the October market upheavals took the shine off bonds. Structured deals fared least badly and may prove the best way upwards in the new year. Michael Marray reports.

Endesa powers Chile into new century

Latin American borrowers who took advantage of the tight spreads and long tenors available during most of 1997 have cause for satisfaction. In the wake of fourth-quarter bond-market volatility, doubts have been raised about their level of access to international capital markets in the next year.

Before the Asian-induced October upheavals, it had been a year of steadily tightening spreads and lengthening tenors, with most deals heavily oversubscribed in spite of a record supply coming onto the market. Landmarks included Chilean utility Endesa's century bond, the first from a Latin company. However issuance all but dried up in November, and in secondary-market trading spreads on Latin bonds have widened out by between 200 and 300 basis points on many issues.

Not surprisingly, money managers have been adopting a wait-and-see attitude, preferring to engage in a little secondary-market trading in order to tidy up their portfolios ready for year assessment, rather than allocate any new money to emerging-market bonds. And borrowers have also been reluctant to risk launching deals into such a volatile market, looking to get Christmas out of the way and reassess the situation in the new year.

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