Spirits Brighten at Istanbul IMF

Issuers, bankers and EM investors gathered in Istanbul over the weekend for the IMF annual meetings note a dramatic improvement in sentiment since the March IDB conference in Medellin. However, market veterans worry that over exuberance willl create a new bubble. “We are now seeing signs of the beginning of global economic recovery, as well as improvement in the functioning of financial markets, but the situation remains fragile,” says Deutsche Bank chairman Josef Ackermann. “There are valid questions about the durability of this recovery,” says Citi senior vice chairman Bill Rhodes. “We need to be highly mindful of the risks to securing the restoration of healthy banking flows.” The pair was speaking at a forum organized by the IIF, which predicts a rebound in capital flows to LatAm next year to $166bn from $122bn this year and $147bn in 2008. Capitalizing on the mood, LatAm bankers are eagerly pitching new issues and liability management, while previously shuttered financing options like euros are back on the table. And in just 6 months, issuers have gone from crisis management and plain vanilla multilateral lines to higher quality problems. “It could again become a recurring source of funds for non-European sovereigns,” Mexico’s head of public credit Gerardo Rodriguez tells LatinFinance, speaking of euros. Last week’s Pemex euro deal reopened the door and other high grade LatAm names like CAF are also heard weighing the European investor base. Mexico – typically one of the most sophisticated sovereign issuers – is also courting foreign investors to participate in the peso bonos market. “I see a lot of potential there in terms of involvement in the local market,” says Rodriguez, speaking of the Asian buyside. Analysts say that most of the risk for the larger LatAm economies is external. However, Brazil’s euphoria over winning the Olympics bid compounds the fear that some participants may get carried away. “There’s risk there, but it remain