Debt financing rollercoaster: Latin American and Caribbean access to international bond markets since the debt crisis, 1982-2012

Includes bibliography

The Mexican maquila industry and the environment: an overview of the issues

Includes bibliography

Trade and maritime transport between Africa and South America

Includes bibliography

The impact of exchange-rate and trade policy on export performance in the 1980s

Includes bibliography

Training and the small enterprises of Latin America

Includes bibliography

Reform to health system financing in Chile

Includes bibliography

Tax reform for human development in Central America

Includes bibliography

Capital flows to Latin America: recent developments

The external environment has deteriorated sharply as a result of the spiraling financial turmoil, and has led to a weakening in commodity prices and fears of a worldwide recession. Latin America and the Caribbean's fastest expansion in 40 years may be threatened as the global credit crunch makes financing scarce and squeezes demand for the region's commodities. This time around the region is better positioned to weather the crisis than in the past, given improvements in macroeconomic and financial policies as well as a reduced net dependency on external capital inflows. However, Latin American markets are feeling the effects of the crisis through a slowdown in capital inflows, large declines in stock price indexes, significant currency adjustments and an increase in debt spreads. Volatility has soared, with the closely watched Chicago Board Options Exchange Volatility Index moving to an all-time high of 70.33 on October 17, indicating that fear (rather than greed) has been ruling the markets.After reaching record lows in May 2007, emerging markets bond spreads are now above pre-Asian crisis levels. The JPMorgan EMBI+ Latin American composite widened by 146 basis points in the third quarter, with spreads reaching 448 basis points at the end of September. Spreads have widened sharply in recent weeks as foreign investors cut back regional exposure for the safety of U.S. Treasuries. The ongoing lack of liquidity and subsequent liquidation of assets is leading to a collapse in asset prices and a sharp widening in spreads. Daily spreads in October have risen to levels not seen since December 2002, making it much more difficult for governments that need financing to get it. Risk premiums for Latin corporates and sovereigns have risen substantially, but have remained well below U.S. junk (high-yield) bonds. Latin corporates are facing a steep rise in foreign exchange borrowing costs (although less than firms in other emerging markets), which raises concerns that refinancing risks will climb.So far, emerging markets vulnerabilities have been more focused on corporates, as sovereigns have improved public debt dynamics and countries' financing needs are under control. Market performance has been driven by the rapid deterioration of emerging markets bank and corporate market, as well as ongoing losses in emerging markets equities. From January to September 2008, the Morgan Stanley Capital International (MSCI) Latin American Index lost almost 28%, while the Emerging Markets Index lost 37% and the G-7 Index lost 24%. While in 2007 the Latin America component gained 47%, almost nine times as much as the MSCI-G7 index for developed markets, since mid-September 2008 stocks in Latin America have been doing worse than stocks in developed countries, as concerns about access to credit and the adverse impact of sharp falls in commodity prices and in local currencies contribute to increased risk aversion and to outflows of capital. Many governments in the region have used revenue from the commodity boom to pay down debt and build reserves. Now, facing a global financial crisis and the threat of recession in developed countries, the biggest question for Latin America is how long and deep this cyclical downturn will be, and how much it is going to reduce commodity prices. Prices for commodities such as soy, gold, copper and oil, which helped fund the region's boom, have fallen 28% since their July 2 high, according to the RJ/CRB Commodity Price Index. According to Morgan Stanley (in a September 29 report), should prices return to their 10-year average, Latin America's balanced budgets would quickly revert to a deficit of 4.1% of GDP. As risk aversion increases, investors are rapidly pulling out massive amounts of money, creating problems for local markets and banks. There is an ongoing shortage of dollars (as investors liquidate assets in Latin American markets), and as currencies depreciate, inflation concerns increase despite the global slowdown. In Brazil and Mexico, central banks deployed billions of dollars of reserves to stem steep currency declines, as companies in these countries, believing their local currencies would continue to strengthen against the U.S. dollar, took debts in dollars. Some companies also made bets using currency derivatives that have led to losses in the billions of dollars. Dramatic currency swings have caused heavy losses for many companies, from Mexico's cement giant Cemex SAB to the Brazilian conglomerate Grupo Votorantim. Mexico's third-largest retailer, Controladora Comercial Mexicana, declared bankruptcy recently after reporting huge losses related to exchange rate bets. As concerns about corporate exposure to dollar-denominated derivatives increases, yields on bonds issued by many of Brazil's and Mexico's leading companies have started to rise, sharply raising the cost of issuing new debt. Latin American external debt issuance came to a halt in the third quarter of 2008, totaling only US$ 690 million. The cost of obtaining loans for capital expenditures, M&A and debt refinancing is also rising substantially for Latin American corporates amid contagion from the U.S. financial crisis. According to bankers, a protracted trend of shortening tenors and widening spreads has intensified in the past few weeks, indicating that bank lending is quickly following the way of bonds and equity. Finally, money transfers from Latin American migrants are expected to decline for the first time this decade, as a result of economic downturns in the U.S. and Spain, inflation and a weaker dollar. The Mexican Central Bank announced that money transfers from Mexicans living in the U.S. dropped a record 12.2% in August. In 2008, migrants from the region will send some 1.7% less in remittances year-on-year when adjusted for inflation, according to the IADB, compounding the adverse effects of the deepening financial turmoil.

Capital Flows to Latin America and the Caribbean: Recent Developments

For six years, the global economy has been driven by the U.S. Federal Reserve’s policies of easy money. Liquidity has flowed from developed to developing economies, financing infrastructure and corporate investment and allowing consumers to indulge in credit-fuelled retail spending. Thus the effective ending of the Fed’s third round of asset purchases (QE3) at the end of October represents both a watershed and the beginning of a new stage in the world economy. The end of asset-purchases comes at a challenging time for emerging markets, with China’s economy slowing, the Euro zone struggling to avoid a recession and the Japanese economy already in recession. The unwinding of the U.S. monetary stimulus, while the European Central Bank and the Bank of Japan step up their monetary stimulus, has underpinned an appreciation by the U.S. dollar, in which most commodities are priced. An appreciated dollar makes dollar-denominated commodities more expensive to buyers, thereby creating pressure for sellers to lower their prices. Latin American markets ended the third quarter of 2014 under pressure from a stronger U.S. dollar. In this changing external context, there are many signs that a slowdown in Latin American and Caribbean (LAC) financial markets, particularly debt markets, which have been breaking issuance records for the past six years, may slowdown from now on. Commodity prices – including those of oil, base metals and some goods – are in a prolonged slump. The Bloomberg commodity price index, a benchmark of commodity investments, has fallen to a five-year low as China’s economy slows down, and with it the demand for commodities. Investment into the LAC region has decelerated, in large part because of a deceleration of mining investments. Latin American currencies have suffered depreciations, as current account deficits have widening for a number of countries. And LAC companies, having issued record amounts of foreign currency bonds may now struggle to service their debt. In October, credit-rating agency Moody’s downgraded the bonds of Brazil’s Petrobras to tow notches above speculative grade because of the impact of falling oil prices and the weaker real on its debt. Growth prospects look brighter in 2015 relative to 2014, but a strengthening U.S. dollar, uneven global growth and weakness in commodity prices are skewing the risk toward the downside for the 2015 forecasts across the region. The Institute of International Finance expects the strengthening of the dollar to have a divergent impact across the region, however, depending on trade and financial linkages. The Institute of International Finance, Capital Flows to Emerging Markets, October 2, 2014. A stronger dollar lifts U.S. purchasing power, supporting exports, growth and capital inflows in countries with close trade links to the U.S. economy. However, rising dollar financing costs will increase pressure on countries with weak external positions. Given the effects of falling oil prices and a stronger dollar, some companies in the region, having issued record amounts of foreign currency bonds, may now struggle to service their debts. Prospects of Fed rate hikes resulting in tighter global liquidity amid the rapid rise in the corporate external bond stock has indeed raised concerns over some companies. However, there is still a shortage of bonds at a global level and the region still enjoys good economic policy management for the most part, so LAC debt markets may continue to enjoy momentum despite occasional bursts of high volatility – even if not at the record levels of recent years.

Socio-demographic analysis of youth in the Caribbean- a three country case study

Many Caribbean youth are doing reasonably well. They live in loving and caring families, attend school and are involved in various social activities in their communities. The health and well-being of the children and youth1 in the Caribbean is, and has been, the centre of attention of many studies, meetings and policy directives set at the regional, subregional and national levels. Programmes have been put in place to address the basic needs of young children in the areas of health and education and to provide guidance and directives to youth and adolescents in the area of professional formation and transition to adulthood. Critical issues such as reproductive health and family planning combined with access to education and information on these topics have been promoted to some extent. And finally, the Caribbean is known for rather high school enrolment rates in primary education that hardly show any gender disparities. While the situation is still good for some, growing numbers of children and youth cannot cope anymore with the challenges experienced quite early in their lives. Absent parents, instable care-taking arrangements, violence and aggression subjected to at home, in schools and among their friends, lack of a perspective in schools and the labour-market, early sexual initiation and teenage pregnancies are some of those issues faced by a rising number of young persons in this part of the world. Emotional instability, psychological stress and increased violence are one of the key triggers for increased violence and involvement in crime exhibited by ever younger youth and children. Further, the region is grappling with rising drop-out rates in secondary education, declining quality schooling in the classrooms and increasing numbers of students who leave school without formal certification. Youth unemployment in the formal labour market is high and improving the quality of professional formation along with the provision of adequate employment opportunities would be critical to enable youth to complete consistently and effectively the transition into adulthood and to take advantage of the opportunities to develop and use their human capital in the process. On a rather general note, the region does not suffer from a shortage of policies and programmes to address the very specific needs of children and youth, but the prominent and severe lack of systematic analysis and monitoring of the situation of children, youth and young families in the Caribbean does not allow for targeted and efficient interventions that promise successful outcomes on the long term. In an effort to assist interested governments to fill this analytical gap, various initiatives are underway to enhance data collection and their systematic analysis2. Population and household censuses are conducted every decade and a variety of household surveys, such as surveys of living conditions, labour force surveys and special surveys focusing on particular sub-groups of the population are conducted, dependent on the resources available, to a varying degree in the countries of the region. One such example is the United Nations Children’s Fund (UNICEF)-funded Multi-Indicator Cluster Surveys (MICS) that assess the situation of children and youth in a country. Over the past years and at present, UNICEF has launched a series of surveys in a number of countries in the Caribbean3. But more needs to be done to ensure that the data available is analyzed to provide the empirical background information for evidence-based policy formulation and monitoring of the efficiency and effectiveness of the efforts undertaken.

Paraguay: a housing finance proposal for middle- to low-income groups

The construction and ownership of homes is fundamental to economic development, the generation of wealth and the formation of the middle class. Although a number of studies have been conducted and programmes implemented in recent decades, there remains a significant housing deficit in Paraguay and Latin America, indicating that such programmes have been unsuccessful. For families unable to document a steady income, the main obstacle to homeownership is often financing. This paper aims to demonstrate the economic and financial feasibility —provided there is sufficient political will and coordination between public and private entities— of a project to build 75,000 homes for 300,000 people (4.5% of the Paraguayan population) with middle to low incomes. The median household income in this segment, for which there is a significant shortage of decent housing, is US$ 396.50. A maximum of US$ 63.44 per month may be set aside for housing costs.