NEW YORK, Nov 29 (Reuters) - Governments and companies in Latin America could halve their global bond sales next year, bankers say, reflecting both the impact of Donald Trump's U.S. presidential victory on investor confidence in emergng markets and the success of previous refinancing efforts.
Bond sales in Latin America and the Caribbean raised about $120 billion in the year through to the U.S. election on Nov. 8, but could fall to between $60 billion and $70 billion next year, according to estimates by some of the region's underwriters.
Trump's campaign policy of trade protection could mean trouble for Latin American borrowers who have close ties with the United States, the region's top trade partner. Trump's vow to boost infrastructure spending has also fanned concern of faster U.S. interest-rate rises, leading to capital outflows from emerging markets looking for a safe haven.
If Trump implements his pledged trade protection policy, restricting imports from Latin America, regional borrowers less dependent on exports to the U.S. will be better able to sell debt next year than those with large U.S. exposure, bankers such as JPMorgan Chase & Co's Lisandro Miguens said. If uncertainty about Trump's policies persists much beyond the president's inauguration on Jan. 20, regional borrowing costs could climb, they said.
But "if Treasury market volatility and uncertainty related to Trump's policies diminish, we could see some normalization in the primary market," said Miguens, whose team at JPMorgan ranked as Latin America's No. 1 bond underwriter after working on 36 deals in the first nine months of the year.
The geopolitical risks created by Trump's election could put the brakes on economic growth in Latin America, where governments and companies alike have struggled with the end of a decade-long commodities boom and political volatility in some countries over the past couple of years.
Most bankers pointed to Mexico, which ships 80 percent of exports to the United States, as one country that could face more restricted access to bond market funding than Brazil or Argentina which are revising economic policies and do relatively little trade with the United States.
According to JPMorgan's Miguens, the region's economic outlook has continued to improve and investors are looking for "places to put their money as cash balances are high." Borrowers are expected to make the large coupons and principal payments due in the next four months, which may help demand for new debt, he added.
But the surprise victory by Trump, a billionaire property mogul, could also make the bond market less attractive to regional borrowers if the U.S. dollar keeps strengthening against local currencies, or yields remain volatile, according to Renato Ejnisman, managing director at Banco Bradesco BBI.
Latin American sovereign and corporate bonds have lost considerable allure in recent days, with shorter-term yields jumping amid the recent sell-off in U.S. Treasury notes.
The premium that investors demand to own Latin American bonds over U.S. Treasuries stands now at about 7.16 percentage points, compared with about 6.2 points at the start of the year, according to JPMorgan's EMBI Diversified Latin America bond index.
"A tighter market for bond fundraising may present the opportunity for banks across the region to take up some of the slack left by skittish debt investors," said Baruc Saez, head of international fixed income for Itaú BBA SA in New York.
But Latin American banks from Mexico to Brazil and Colombia have restrained disbursements to corporations in the wake of a widespread economic slowdown, rising delinquencies and tougher capital restrictions. In Brazil alone corporate loans may shrink 5.0 percent at some of the nation's top lenders.
However, the need to tap bond financing among countries or companies like Petróleo Brasileiro SA, the world's most indebted oil firm, might have eased in recent months.
Many of them managed to pre-finance a large amount of their upcoming debt maturities, said Sáez and Pedro Frade Rodrigues, Itaú BBA's head of international debt capital markets for Brazil.
According to people with knowledge of the plan, Petrobras , as the company is known, was considering selling between $4 billion and $6 billion in longer-term bonds before Trump's election. The company scrapped the plan as markets turned volatile in the run-up to the U.S. ballot, they added.
Petrobras declined to comment.
In any case, those borrowers that gain access to the global bond market next year may do it just to keep replacing costlier debt sold in the past, the bankers said.
About 70 percent of this year's bond sales were related to such liability management, with the rest going to fund acquisitions or capital spending plans, bankers said.
"While you will see investors turning more selective, the sovereign and corporate issues with structures offering currency and rate volatility protection or solutions to potential cash flow problems will have an edge," Itaú BBA's Rodrigues said. (Guillermo Parra-Bernal)