Publish in Analysis - Tuesday, December 13, 2016
Finance minister Alfonso Prat-Gay and chief debt negotiatior Luis Caputo on April 22 announcing details of the successful bond. (Photo: Argentina's Finance Ministry)
The best news in Latin America business in 2016.
BY LATINVEX EDITORS
The five best events in Latin American business this year, according to Latinvex editors.
#1 Argentina Debt Agreement, Return to Capital Markets
In February, Argentina’s new government reached an agreement with the country’s holdout creditors, ending the long-running litigation over the country’s 2001 debt default.
“This is the equivalent of a giant albatross being lifted from Argentina’s neck,” Brett Diment, the head of emerging market debt at Aberdeen Asset Management, told The New York Times.
Unlike his predecessor, President Mauricio Macri moved quickly to end the dispute, which was blocking Argentina’s access to international capital markets.
In the end, Argentina paid its holdouts more than $12 billion, which it quickly recovered in terms of a dramatic hike in issues by both the federal and state governments in Argentina. The move also led to a significant improvement in US-Argentina relations.
In April, Argentina returned to international capital markets after more than 15 years. The country’s government raised $16.5 billion, with demand almost reaching $70 billion. That was the largest sale of debt by any developing nation and one of the biggest order books ever recorded, according to the Financial Times.
"It's an absolute record,” Argentine Finance Minister Alfonso Prat-Gay commented.“Before the only one who lent us money was Chavez," he said, referring to the previous government’s dependency on loans from Venezuela under the late strongman Hugo Chavez.
After inheriting a booming economy in 2010, Rousseff managed to commit one mistake after another – both in terms of investor-hostile policies and personal style. When Brazil’s economy started to face challenges with a slowing economy in China – a key market for Brazilian commodities – Rousseff failed to implement the correct fiscal and economic policies, leading to Brazil’s worst economic performance in 25 years.
Temer has quickly managed to regain investor confidence through a series of measures and, unlike Rousseff, has been successful in getting Brazil’s splintered Congress to approve badly-needed reforms.
#3 Panama Canal Expansion
In June, the Panama Canal inaugurated its expanded $5.4 billion waterway.
The new waterway doubles the Panama Canal’s capacity and could lead to a 50 percent increase in tonnage by 2025, according to projections from the Panama Canal Authority (ACP).
The expanded canal is likely to increase revenues to up to 40 percent (from the current $1 billion a year to $1.4 billion) in the one-year outlook and increase cargo transit to up to 388,000 tons, according to global consultancy IHS.
It also will provide a boost to Panama’s GDP growth – already among the leaders in Latin America -- and improve the country’s sovereign rating, Fitch points out.
“The Expansion Program is truly an innovative and landmark project,” Shearman & Sterling partner Cynthia Urda Kassis said in a statement. Shearman advised ACP on the complex $2.3 billion loan transaction that partially financed the new locks as well as the $450 million bond offering to finance a new bridge crossing the Atlantic end of the Canal.
The Panama Canal was opened in 1914 and is considered one of the world’s leading engineering marvels, basically using the same concept and technology from its opening until today. “It became one of the world’s most significant and massive engineering feats, with enough earth removed to circle the earth four times at the equator in railroad cars,” former Panama Canal Commission Chairman Robert McMillan writes in his book Global Passage.
#4 US-Cuba Improvements
In March, President Barack Obama visited Cuba – the first visit by a US president in more than 88 years. The visit marked the highlight of his efforts to improve US relations with Cuba, including lifting several restrictions on business and trade with the island, albeit short of lifting the actual embargo.
The result was an increase in US travel connections, including through airlines and cruise ships, while US hotel chains like Starwood opened a Four Points by Sheraton in capital Havana – the first US hotel top open in Cuba in nearly 60 years. (Marriott also plans hotel openings).
Now, the progress made is in danger of being undone by Obama’s successor, Donald Trump (See Latin America Business: Worst in 2016).
#5 Peru Elects Reformer
In June, Peru elected a well-respected former investment banker with ample government experience to lead the country. Pedro Pablo Kuczynski was the clear favorite among both local and foreign investors and is expected to make Peru – already one of Latin America’s most attractive markets for investors – an even better place for business.
“By and large, the election of PPK has been viewed by the private sector as the most bullish electoral outcome of the past quarter century,” noted Franco Uccelli, Executive Director of Emerging Markets Research at JP Morgan, in a report to clients.
While his first few months in power have been marred by political mistakes, investors remain upbeat on Peru’s outlook with Kuczynski.
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