In a context of higher interest rates and borrowing costs worldwide, the total issuance of international bonds in Latin America and the Caribbean (LAC) in 2022 was 64,000 million dollars, 57% less than in 2021 and the lowest annual value since 2008, according to the most recent ECLAC report on capital flows in the region.
The study Capital flows to Latin America and the Caribbean: balance of the year 2022 and first events of 2023 (Capital Flows to Latin America and the Caribbean: 2022 year-in-review and 2023 early developments, English only) provides an overview of international bond issuance, interest rate differentials, and credit ratings for the region in 2022 and early 2023. This report presents and analyzes the main trends and evolution of capital flows to the region and is published by the ECLAC office in Washington DC three times a year.
According to the report, the average coupon was 1.3% higher and the average maturity was three years shorter than in 2021. Concerns about global inflation, the tightening of monetary policy by the US Federal Reserve and the strength of the dollar, as well as the war in Ukraine, contributed to raise financing costs.
The biggest slowdown in 2022 was observed in the corporate sector, which since 2009 had been the main driver of international debt issuance in the region. Taken together, corporate issuance (including private banks, private non-banks, quasi-sovereigns, and supranationals) declined 66% from the prior year. In year-on-year terms, issuance by private banks and non-banks combined decreased 72% in 2022 compared to 2021. Issuance by quasi-sovereign companies and supranational entities fell 59% and 15%, respectively. Sovereign (government) issuance decreased by 43%, less than global corporate issuance, and accounted for 51% of total international debt issuance in the region in 2022.
According to the report, the top three issuers in the region, both corporate and sovereign combined, were Mexico, Chile and Brazil, in that order, which together accounted for 59% of total regional issuance. Mexico was the main issuer, representing 26% of all LAC bond issuances in 2022, followed by Chile (17%) and Brazil (16%). Mexico and Chile were also the top two sovereign issuers in the region. Together they accounted for half of all sovereign issuance in the region. Brazil’s bond issues in 2022 were all from the corporate sector, with JBS SA, the world’s largest meat processing company, representing 60% of the total. Following recent trends, more than half of all LAC corporate bond issuances came from Brazilian (32%) and Mexican (22%) companies.
Following the general market trend of reduced bond activity due to worsening macroeconomic conditions, international green, social, sustainability and sustainability-linked bond (GSSS) issuance from the region also they decreased in 2022. The largest decrease was also observed in the corporate sector. The 81% decline in international private sector GSSS bond issuance in 2022 was almost twice that of the sovereign sector (42%), while there was a 124% increase in the share of quasi-sovereign issuance and supranationals.
As a whole, the region issued $20.5 billion of international GSSS bonds in 2022, 56% less than in 2021, but still the second largest annual GSSS volume ever issued in international markets. Despite the slowdown in volumes, the region’s GSSS bond issuance represented a 32% share of total issuance in international markets, a slight increase from 31% in 2021.
Supported by the easing of pandemic-related pressures, lower financing needs, and greater confidence in local markets, the region’s credit outlook trended upward in the first half of the year, but amid limited financing options and higher external borrowing costs, tended downward in the second semester. At the end of December 2022, it was found that negative credit rating actions exceeded positive actions by one unit, the best annual balance since 2012.