Sovereigns Shun DCM Party

January is shaping up to be an active month for LatAm debt issuance, at least for corporates. The region has seen $6.17bn in cross-border sales since January 1, up from $5.83bn in the first 2 weeks of 2010. Improved liquidity and access to local funds have meant that the region’s sovereigns have thus far sat out what has traditionally been an active DCM month. “These countries are able to fund themselves in local currency and their balance of payments are in a position where they don’t need to fund themselves to a massive extent in dollars,” Brett Rosen, sovereign analyst at Standard Chartered, tells LatinFinance. He adds that this is thanks in part to improved trade balances and high commodity prices, along with generally better fiscal performance across the board. However, Rosen says he expects some liability management in the medium term. “Sovereigns don’t need money,” echoes a DCM banker. Meanwhile, corporates, banks, and even quasi-sovereigns do not have the same flexibility as sovereign issuers and are taking advantage of present issuing conditions. The banker notes that LatAm issuers were monitoring recent debt auctions conducted by Spain, Portugal and Italy. They were generally seen as successful, with many analysts fearing heightened volatility if the sales went badly. Analysts also say change of government in Brazil and a new public credit director in Mexico may have kept these two issuers sidelined. Argentina, which has been considering a new issue since last year’s agreement with holdouts, is expected to come at some point, though sensitive to price. Among smaller nations, El Salvador has mandated Deutsche for a new deal, and the Dominican Republic last year approved an issue. Costa Rica is another that analysts expect will tap.