Mexican rivals

IFR Latin America Report 2011
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Solid economic performance in most major markets is expected to continue throughout the coming year, which should help maintain the cycle of growth and increased trade now being enjoyed by Latin American companies.

“Latin America has been growing faster than expected at the end of 2010 due to strong domestic demand growth, improved terms of trade and strong capital inflows,” Juan Rutz, chief economist for economic scenarios at BBVA Research, said in a report. “Nevertheless, we expect GDP growth to continue converging to potential growth of about 4% for the region as a whole.”

This will further the desire for debt to fund growth—both through acquisitions and organically.

Katia Bouazza, head of global capital markets, Latin America, at HSBC, said: “Both Brazil and Mexico were developing markets. Mexico has taken the leadership in terms of developing a more liquid and broadly distributed market on the debt side for local peso bonds. But Brazil has caught up quite nicely.”

Bouazza said: “Mexico and Brazil are markets that can absorb larger size debt transactions, different types of structures, and longer maturities. Although other markets in Latin America, such as Colombia and Chile and even Argentina see some local market activity, none are as active as Brazil and Mexico.”

Increasing regional investor appetite for intra-regional debt, coupled with increasing intra-regional and inter-regional M&A activity are likely to continue pushing growth in domestic markets. “We will see a lot of companies raising substantial amounts to buy companies here and outside the region,” said one banker.