Key Points
- Latin America’s debt issuance reached $127 billion in 2024, up 42% from 2023.
- Federal Reserve policies and U.S. political shifts are critical risks for 2025.
- In 2024, investors withdrew $24 billion from emerging-market bond funds. Borrowers are now focusing on refinancing $52 billion in maturing debt.
- Political instability in Brazil, Colombia, and Mexico threatens sentiment. As higher rates and uncertainty persist, corporate issuance may slow.
Latin America’s borrowing spree in global markets, which reached its highest pace in three years with $127 billion in issuance last year, is expected to taper off in 2025. Government bond sales, first-time borrowers, and a resurgence of corporate transactions in Argentina fueled a 42% rise in issuance compared to 2023. Despite forecasts from major underwriters anticipating similar or slightly higher volumes in 2025, significant challenges loom.
The Federal Reserve’s interest-rate trajectory, Donald Trump’s potential return to the White House, and concerns about China’s economic stability could dampen issuance. Political risks, including elections and fiscal challenges in Brazil, Colombia, and Mexico, add to the uncertainty. Latin America’s debt market is particularly sensitive to U.S. economic conditions and Federal Reserve policies, key factors in shaping borrowing strategies.
The timing of the Federal Reserve’s rate cuts is crucial, as slower cuts may reduce the window for debt sales. Meanwhile, Trump’s possible policies, such as tariffs and mass deportations, could fan inflation, further narrowing opportunities for borrowers. Investors have already been retreating from emerging-market debt, with global EM bond funds experiencing $24 billion in outflows in 2024.
The debt boom in 2024 was fueled by strong demand, low credit spreads, and cross-over investor interest, helping Mexico and Brazil achieve record deals. However, spreads remain tight, driven more by U.S. market dynamics than regional fundamentals. Borrowers seeking to refinance maturing debt—around $52 billion over the next two years—will likely dominate issuance. Yet, concerns over rising rates and domestic political instability persist.
Despite the optimism for steady volumes, slowing corporate issuance and geopolitical volatility may temper the pace, with governments and companies navigating a volatile global economic environment.