Latin America boosts local currency-denominated debt issuance

Several Latin American countries have upped their issuance of local currency-denominated external debt, the Economic Commission of Latin America and the Caribbean (ECLAC) said in a report released on Friday.

This allows them to obtain longer maturity instruments, larger quantities of borrowing and lower interest rates, but they have to face problems when issuing debt in their own currencies, said the report.

Brazil, Mexico, Chile, Colombia and Uruguay are among the countries that have issued external debt in their own currencies.

The move should reduce the risk of very serious economic crisis in those countries, said the ECLAC, an economic body of the United Nations.

If external debt is denominated in hard currencies such as U.S. dollars, euros, British pounds or yen and a devaluation occurs, debt service costs will rise sharply, increasing job losses and hitting production capacity, the report said.

Emerging economies, especially Brazil and Mexico, have made great efforts to boost local currency issuance.

International investors have 4 percent of government bonds issued locally, but 70 percent of Mexican government bonds with 20 years or longer maturities are owned by international buyers, said the report.

Source: Xinhua