Mexico, the second in Latin America with more commercial indebtedness

Brazil, Mexico, Colombia and Chile will account for most of the sovereign debt (liabilities from short-term operations) in the region, probably around 90 per cent, which will amount to 322 billion dollars.

The country's liabilities are 17% of the entire region; Brazil, with 63%.
The country's liabilities are 17% of the entire region; Brazil, with 63%.

According to S & P Global, Brazil will account for 63 per cent of total commercial issues this year, followed by Mexico (17 per cent), according to the rating agency, only 23 per cent of Mexico's total debt is denominated in the currency. foreign However, in other sovereigns with an investment grade, such as Uruguay, debt denominated in foreign currency constitutes more than 50 per cent.

In addition, 90 per cent of the regional debt will represent 6.3 per cent of the regional Gross Domestic Product (GDP). Likewise, most of the gross commercial debt will come from these governments and will be carried out in the markets and in local currencies.

Figures from the Ministry of Finance and Public Credit (SHCP) refer that until December 2018 the net debt of the country amounted to 95 thousand 698.5 million dollars, while as of January of this year, the gross debt was 98 thousand 564.4 million dollars, while the debt in capital markets and foreign trade was during the first month of the year, of 70 thousand and two thousand million dollars, respectively.

Data from Standard & Poor's indicate that around 19 per cent (or 61 billion dollars) of the long-term gross indebtedness of the Latin American countries will be used to refinance long-term commercial debt to be matured, which will translate into an estimated long-term net commercial debt of 262 billion dollars; therefore, it projects that the balance of commercial debt in Latin America and the Caribbean will reach an equivalent of 2.3 trillion dollars.

However, the projected increase in the debt to GDP ratio is subject to uncertainty due to the potential changes in the exchange rate in many countries, so it expects short-term commercial debt outstanding to fall to 75 billion euros. dollars in 2019 (or about 1.5 per cent of GDP) from 88 billion dollars in 2018.

It should be remembered that the estimates focus on the debt issued by the central government in its name and exclude the debt of local governments and social security, as well as the debt issued by other public bodies and obligations guaranteed by the government.

In terms of commercial debt instruments, the provisions for long-term indebtedness include bonds (with maturities of more than one year) issued on stock exchanges or sold as private placements, as well as bank commercial credits.

Five of the sovereigns that we qualify have only foreign currency debt: Ecuador, El Salvador, Montserrat, Nicaragua and Panama. Only 23 per cent of Mexico's total debt is denominated in foreign currency. However, in other sovereigns with an investment grade, such as Uruguay, the debt denominated in foreign currency constitutes more than 50 per cent of the total debt. Similarly, long-term debt at a fixed rate represents more than half of the total debt for investment-grade sovereigns.

In addition, the largest projected increase in commercial indebtedness this year will be in Brazil, and the largest reduction will occur in Argentina (given that it agreed to a debt program with the International Monetary Fund and other multilateral creditors). Most of the gross indebtedness of these governments will be in the markets and local currencies.

However, as a percentage of GDP, the debt balance will reach 43.9 per cent in 2019, from 41.9 per cent the previous year, according to our projections. The projected increase in the debt to GDP ratio is subject to uncertainty because of the potential changes in the exchange rate in many countries.

Likewise, the rating agency projects that the percentage of sovereign commercial debt issued with a rating of 'BBB-' or higher (investment grade) will be around 34 per cent of the total commercial debt, while the sovereigns rated in the 'BB' category will issue 52 per cent of commercial debt in 2019; while Mexico will have that 17 per cent, Brazil will have 63 per cent.

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