Patterns of Financing During Periods of High Risk Aversion : How Have Latin Firms Fared in this Crisis So Far?
This note examines the extent to which firms in Latin America have been able to raise capital through debt and equity securities as well as syndicated loans, both abroad and domestically, since the onset of the 2008 global financial crisis. The public and the private sectors alike lost access to foreign sources of financing during the height of the turbulence. Furthermore, two months after the Lehman Brothers' collapse, only government owned firms and governments themselves were able to re-enter international markets to some extent and raise capital. Thus, the evidence suggests an important role for government guarantees in attracting foreign investors in times of high risk aversion. In domestic and syndicated loan markets, there has been a marked decrease in the total amount raised, although they have remained a viable option for the private sector in Latin America. To the extent possible, non-government borrowers have been able to raise capital in these markets and have generally met their rollover needs. In contrast, the role of sovereign guarantees in attracting local investors seems to have been more important in Eastern Europe and Southeast Asia, where government entities have accounted for respectively 80 and 44 percent of all new issues in local markets, compared to less than 15 percent in LAC.