Author: James Smalhout “The fundamentals are in place in several countries,” says Arun Sharma, head of structured finance at the International Finance Corporation. “Something significant could happen.” Sharma thinks that securitization is becoming much more important for emerging markets.
Progress has come in fits and starts for almost a decade. But now, the fundamentals are shifting. Many developing countries are balancing their budgets or even running surpluses, for the very first time. Inflation is down and governments have been privatizing their old pay-as-you-go social security systems. “Crowding out, particularly by governments in Latin America, is becoming less and less of a problem and now they need to develop new securities for domestic markets,” says Maureen Coen, a managing director with Moody’s in New York. Cross-border deals originating in developing countries meanwhile are becoming more innovative than ever. “We are seeing more creative proposals from investment bankers for both domestic and cross-border transactions,” she observes. “They are finally getting deals done, but the cost of securitization is not yet where issuers want it to be. So, some cross-border deals are not coming to market.”
Sharma’s busy little team at the IFC has been spreading the gospel of securitization from Ankara to Argentina, and from South Africa to Seoul.