Sell Side Throws in LatAm Towel

LatAm’s last line of defence – sell side analysts – has fallen, indicating further weakness in market sentiment. “It is more of a corporate problem than a sovereign problem, but in many countries it will become a sovereign problem,” Paulo Leme, head of EM economic research at Goldman Sachs. “Latin America is back to the game again,” he adds, highlighting the region as among the most vulnerable. “We thought it was much safer, the sovereign is in pretty good shape, but once you work it out the corporate maturities are quite spectacular,” says the veteran analyst, highlighting Argentina as a soft spot. “In Latin America, the country where we like to buy protection is actually Colombia,” says Daniel Tenengauzer, head of global currencies strategy and EM debt strategy at Merrill Lynch. “We will continue to see deleveraging, a strong dollar, much weaker exchange rates in the region, that will have unfortunately a very strong pass through effect, as we’re seeing in Mexico and Brazil,” he adds. “Until there’s some recovery in the US I don’t think we’ll see a lot of recovery in emerging markets corporates,” says Anne Milne, head of Deutsche Bank’s LatAm corporate bond research group. “I do think you’re going to see the Latin American names outperform first,” she adds. They were speaking at an EMTA event in New York last week.