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Latin American Corporate Finance: Is There A Dark Corner?

Since last year there has been much talk of possible financial stress stemming from increased debt leverage in non-financial corporates of emerging markets economies. A recent study has brought to light some key evidence on the Latin American case (Bastos et al, 2015).

EME non-financial corporate debt has been on the rise

Back in 2013, I called attention to new features of international long-term private debt finance in developing countries that arose since the global financial crisis. While global cross-border bank lending with maturities at or beyond five years slowed down after 2008, bond issues have more than filled the void, explaining a rise in total flows since then. While banks in advanced economies - especially in Europe - were deleveraging, unconventional monetary policies and hype about emerging and frontier markets comprised a favorable backdrop for a massive surge in the latter's bond issuance (Chart 1).

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