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The crisis in Asia created ripples throughout the financial world. In roundtables moderated by Global Finance's Joseph Giarraputo and Ernest McCrary in January, project finance executives discussed the situation for Latin America.
GLOBAL FINANCE: How will the Asian economic crisis affect Latin American prospects for project finance?
EVERETT SANTOS, CEO, Latin America group, Emerging Markets Partnership: Latin America did not react to the Asian crisis until the American stock market broke in late October and American and European investors responded. The region is tied to Europe and the United States because it is dependent on exports, and last year was its strongest growth year in almost 25 years. So if money is suddenly unavailable because of the Asian situation, it could impact the privatizations under way, especially in Brazil where privatizations are sustaining its current account deficit.
MICHAEL PEPE, vice president, project finance group, Credit Lyonnais: Each Latin American country is affected differently by the crisis. Argentina, for instance, is not as strongly affected. It has a relatively closed economy. Exports count for only 10% of GNP, and 30% of them go to Brazil; not much goes to Asia. Chile, on the other hand, sends 30% of its exports to Asia. It was also hit by falling commodity prices, which themselves were due to less Asian demand for copper and gold. So in Chile the more difficult transactions in the bond or bank markets will not be consummated, and even good deals are being deferred.
ARUN NAYAR, president, ABB Project & Trade Finance (USA): We know of sponsors who have deferred projects that were about to start. Will they return?
STEVEN GREENWALD, managing director, global project finance, Credit Suisse First Boston: Worldwide, corporate borrowers are paying more in terms of spread than before midOctober. Latin American bond market spreads have widened, often dramatically, but deals will continue. They will be more costly for the issuer. A transaction that I'm working on, involving one of Latin America's largest companies, has been delayed because it is waiting for the spreads to narrow.
ALFREDO BERLANGA, associate, structured finance group, GE Capital Services: We learned from the 1994 crisis that investors must analyze and understand the fundamental economics in every instance. Today, our business decisions are based...