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Capital Markets

Latin America across the decades

Recoveries, reschedulings, crises and scandal: no region’s financial markets have been as turbulent as Latin America’s over the last five decades. Euromoney had a ringside seat for all the booms and busts, and access to some of the colourful characters – from presidents to bank chiefs – that have tried to steer Latin America towards a more sustainable path.

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The 1960s & 1970s

LatAm decades

Eurocurrency loans to Brazil (April 1972)

Long before the Eurobond party exploded across Latin America, Euromoney was tracking the debt build-up. An article written by Erwin Brecher, chairman of the Braemar Group of Companies, proved that the ramp-up in hard currency debt wasn’t going unnoticed

Two articles tracked the problems inherent in petrodollars washing around developing economies. It was of special interest because of the author: Pedro Pablo Kuczynski. The man who would become president of the Peruvian Republic was writing as vice-president of Kuhn, Loeb & Co in New York

Argentina’s fortunes were improving and international investors were lending to the country once again. Written by Euromoney’s future chairman, Richard Ensor, the headline and much of the comment could have been reapplied across the decades. As one banker said: “If they could have political stability, they could have a real economic miracle”

 

 

LatAm decades

President Lopez Portillo: guiding Mexico through its crisis years (August 1977)

A Latin American leader inheriting economic, financial and social chaos and needing to placate a nervous and impatient international banking community – familiar territory. It also illustrated Euromoney’s emergence as the magazine of choice for the region’s presidents and policy makers when needing to articulate important and nuanced messages

LatAm decades

Colombia: Latin America’s prickliest borrower (June 1978)

Colombia’s central bank had become wary of the growing visits of foreign bankers attempting to make money by putting the country into debt. Euromoney evoked the sense of mistrust of officials had developed towards the “suitcase banking fraternity” that beat a path to the country’s central bank



The 1980s

The protagonist in this riches-to-arrest-warrant story was the president and owner of Argentina’s Banco de Intercambio Regional, Jose Rafael Trozzo. A member of Opus Dei, he rubbed shoulders with the wealthy, politicians and the top echelons of the Argentine military forces before going on the run

Euromoney covered the first publicly listed Eurobond to be rescheduled in the history of the Euromarkets. Unsurprisingly, given the debt-rescheduling narrative that was to form in Latin America, the issuer, Atlantic Community Development Group for Latin America, was from the region

LatAm decades

Step by step through the Costa Rica saga (August 1982)

The story of Costa Rica’s rescheduling would move to the world of academia, creating conflict not just between “the busted central American state and its bankers but between its bankers”. The saga exposed the difference in outlook and tradition of commercial and investment bankers

Citibank’s Bill Rhodes had already led reschedulings for Mexico, Brazil, Argentina, Peru and Uruguay.

It would not end there.

“Restructuring Latin America is no ordinary job,” we wrote. “Yet it has fallen to a man of seemingly ordinary persuasion: William Rhodes, conventional, quiet, a jogger and a cigar smoker”

LatAm decades

Who will be Baker’s guinea pig? (March 1986)

Remember the Baker Plan? Conceived by then US secretary of state, James Baker, it was aimed at harnessing bank lending to bring fresh economic programmes to the indebted countries of Latin America. Euromoney looked at the implications for Mexico, Brazil, Chile and Peru. Baker’s template failed to get off the ground and was soon superseded by the Brady Plan

Bankers believed that debt swaps were the way forward for the debt crisis in Latin America. Could this dream come true, Euromoney asked?

“Whatever solves the problem of Latin American debt will free the banking world of an intolerable incubus,” we wrote. Citicorp had the largest exposure – no wonder Bill Rhodes was already at the centre of the discussions


The 1990s

In July 1992, Bill Rhodes, chairman of the debt restructuring committee, described the agreement of principle on a Brazilian Brady Plan as the end of the Latin American debt crisis. Euromoney traced the complexities of the deals and highlighted the longer-term challenges to the creditworthiness of the region’s largest economy in the years ahead

LatAm decades 1990s

Cash-hungry Latins love equity derivatives (October 1993)

The surge in Latin Americans’ use of equity derivatives led Euromoney to investigate the phenomenon. The article addressed the opaque risks building in the sector, including the credit risk that was later highlighted when the use of these products blew up in the faces of some of the banks’ corporate clients in the region

LatAm decades 1990s

Crunch time for Cardoso (January 1995)

Against the odds, Brazil’s Plano Real worked – and spectacularly so. The Plano Real also got Fernando Cardoso elected president, but as the hype mounted there was a still a lot of work to do – not least normalizing monetary policy and managing the crisis that sky-high interest rates were inflicting on the country’s banks. The prescribed policy mix would have a profound effect for years to come

LatAm decades 1990s

Malan seals the piggy banks (March 1995)

Brazilian finance minister Pedro Malan’s seizure of two of the biggest state banks for São Paulo and Rio de Janeiro – Banespa and Banerj – was the beginning of the consolidation of the country’s banking sector that has led it to become one of the most highly concentrated and profitable in the world today

 

 

LatAm decades 1990s

 

The presence of international banks has waxed and waned in Latin America, but HSBC’s acquisition of Bamerindus for $1 billion was big news. The decision was controversial locally – the central bank criticized for accepting a low price – but the deal came with many challenges for the universal bank. Challenges it was ultimately unable to overcome

To say that the Mexican banking industry had a tough few years following the Tequila crisis is an understatement – they were to be rocked again by the Asian crisis and widespread money laundering investigations. The authorities responded with Fobaproa, a bailout vehicle designed to save and consolidate the system. But that, too, would become embroiled in a political crisis that threatened to undermine the foreign banks’ acquisitive entry to the Mexican market

The 2000s

Delistings of Argentine subsidiaries by foreign companies had cut the market in half. A badly needed restructuring of the Bolsa was being held up by conservatives who feared increased competition. As the article correctly observed about the Merval: “By the time the traditionalists come to their senses, the market could be dead”

Amid the jubilation that accompanied the $29.5 billion debt liability deal that CSFB and JPMorgan pulled off for Argentina’s finance minister, Domingo Cavallo, Euromoney kept its sense of perspective.

“How much it helped Argentina is less clear,” we wrote. “Investors participated for technical reasons, not out of faith that the economy is improving.”

Argentina defaulted six months later

One constant among the turbulence in the region – and Brazil specifically – has been the unremitting growth of Itaú. And the constant at the firm during these years has been Roberto Setubal, whose drive would make Itaú the largest private-sector bank in Brazil and one of the largest emerging market banks in the world

The underlying narrative of a hot investment banking market that was increasingly overbanked held true in the coming years. It set the scene for the battle royal that was to come over the next decade in the region’s most important investment banking market

 

After 35 years at the Inter-American Development Bank few have had a better vantage point for the region’s many financial crises and tests. As Eloy Garcia departed, the Chilean gave his unique perspective on the progress made by both the bank and the region during those decades

Does anyone represent the Latin American boom and bust more than Eike Batista? Clues to his eventual downfall were here: “I think the world lived a bonanza for while – the world is vaccinated against the excess disease for at least a decade now.”

Another is his conclusion: “There are so many crappy projects in the world that were only possible in the boom times”



The 2010s

When Argentine president Cristina Kirchner tried to grab $6.6 billion of reserves from the country’s central bank, its governor, Martin Redrado, refused to play ball. A standoff ensued that threatened a full-scale constitutional crisis as Redrado struggled to maintain the independence of the central bank, eventually at the cost of his own job

2010 was a big year for Brazilian finance and nothing was bigger than Petrobras’ $70 billion follow-on offering. Euromoney got exclusive access to the oil producer’s management and the investment bankers who led the transaction. The optimism about Petrobras – and Brazil more widely – drove the deal’s success, but the seeds of the underperformance to come and investors’ disregard of political risks were evident throughout the process

Chile has long been the outlier among – and the model for – Latin American economies. Euromoney talked to Felipe Larraín, the architect of Chile’s success during his first stint as finance minister, about how the country could make the next leap forward to OECD membership and avoid the middle-income trap

Buoyed only marginally by strong oil prices, Mexico embarked on a series of important and, in many cases, unpopular structural reforms. Although finance minister Luis Videgaray’s reforms failed to spark the expected surge in sustainable GDP, the performance of the economy without such forward thinking would have been much worse

The inside story of how Argentina capitalized on the political momentum of Mauricio Macri’s presidential win in 2015. The sovereign secured a stunning deal with the bond holdouts and re-accessed the markets in style – generating the largest ever emerging market demand in its $16.5 billion blowout bond. The story reveals the challenges – and successes – of the deal led by finance minister Luis ‘Toto’ Caputo

BTG Pactual was brought to its knees when its founder and chief executive, Andre Esteves, was arrested as part of the Lava Jato corruption scandals. It was a huge ‘key man’ risk stress test – one of the biggest in financial history. The story revealed the depths of the crisis and how the bank managed to continue to operate and ultimately to recover


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