Sovereign Issuance Seen Dropping 31%

International LatAm sovereign bond issuance will drop 31% to $15.7bn this year, from $20.6bn in 2010, covering just 4% of total needs, according to Fitch. Overall borrowing will be 2% lower this year, at $398bn, the agency adds, and close to 90% of financing will come from domestic sources. About 70% of the needs represent amortization payments on long and short-term debt, most of it local. “This decreased reliance on foreign lending and external issuance reduces vulnerabilities stemming from external market volatility, financial shocks and foreign exchange rate risks, while contributing to an improving debt structure,” says Fitch. Jamaica has the largest financing needs (16.3% of GDP), followed by Brazil (10.8%), although the latter has much lower refinancing risk. Peru (1.2%) and Chile (1.7%) come out ahead of regional peers with the lowest funding requirements. Argentina (5.7%) and El Salvador (7.8%), along with Jamaica, have the highest refinancing risk due to limited financing options, debt sustainability questions and concerns about meeting IMF program targets, says Fitch. It expects El Salvador to issue abroad in 2011 to meet a Eurobond maturity. Panama, the Dominican Republic and Uruguay will finance themselves primarily overseas in 2011, and financing needs for all 3 will be below 5.0% of GDP, adds the agency.