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Small but sound sovereigns attract cash-rich investors

It’s not all bad. The world of international finance works in mysterious ways, and right now it looks as though central America is actually a beneficiary of Argentina’s default and the US recession.

No-one expected this. After the Mexican economic crisis of 1994-95, the tequila effect, as the subsequent contagion was known, devastated the Latin American region for years. But today, the tango effect of Argentina's $95 billion bond default seems barely to have spilled over into Brazil. Even Uruguay, home from home for wealthy Argentines, came to the market with a $250 million bond in November.

The Dominican Republic started the ball rolling as early as September 20, with a deal originally slated for September 11. The $500 million five-year bond paid came at a premium of just 25bp over the expected price on September 11, largely because of the size and strength of the pre-tragedy order book.

By the beginning of November, Guatemala and Panama had both issued bonds from scratch, and there was talk of a Barbados deal.

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