Latin Finance - March/April 2012 - 28

finance ministry scorecard

and Standard & Poor’s have Uruguay with BB+ ratings, and in January Moody’s joined them at one notch below investment grade, raising it to Ba1. “The government in Uruguay continues to work in reducing the debt burden, extending maturities, and reducing the exchange rate risk on their debt by placing more emphasis on local currency denominated debt,” Mosquera says.

to less than 1%. This contrasts with a country like El Salvador, whose ministry received praise for making the best of a challenging political environment. “El Salvador has passed two tax reforms, despite a difficult situation,” says Boris Segura, strategist at Nomura. “[Finance Minister Carlos Cáceres] has been able to hold off fiscal deterioration.” While external conditions and natural disasters have made it trickier Mission Accomplished for the country to comply with its IMF After skillfully managing its fiscal needs commitments, the recent tax reform in the wake of a devastating earthquake suggests activity in the right direction, in 2010, Chile’s ministry of says Fitch’s Mosquera. finance had an easier, albeit “It’s not a large one, but 2012 Finance Ministry Scorecard less eventful year in 2011. It it sends a good signal to Colombian reform agenda leads the way nonetheless saw improvement market participants about Country Minister in terms of transparency, the government’s efforts accountability and reduced to increase the still low tax 1 Colombia Juan Carlos Echeverry room for discretionary fiscal burden,” Mosquera says. policies with changes in fiscal 2 Peru Ismael Benavides/Luis Miguel Castilla Costa Rica has rules, says Mosquera. faced difficulties on the 3 Uruguay Fernando Lorenzo The country has kept debt congressional front, but has 4 Chile Felipe Larraín levels down, but still returned also managed to keep spending to the market in 2010 and 2011 under control. “To [Finance 5 Mexico Ernesto Coredero/José Antonio Meade to enhance the benchmark Minister Fernando] Herrero’s 6 Brazil Guido Mantega curve for issuers at home and credit, he has controlled 7 El Salvador Carlos Cáceres abroad. spending. He inherited a bad “I’d say mission situation, and it has not yet 8 Panama Alberto Vallarino/Frank De Lima accomplished,” says Fitch’s gotten out of hand,” Segura 9 Costa Rica Fernando Herrero Mosquera, with regard to the says. 10 Guatemala Rolando del Cid issue of economic transparency Meanwhile, it remains to be on the part of the government. seen what the new cabinet just 11 Dominican Republic Vicente Bengoa He goes on to explain that sworn in for Jamaica can do. 12 Jamaica Audley Shaw/Peter Phillips the government continues to The finance ministry was doing 13 Ecuador Patricio Rivera rebuild savings after using well, until wage increases part of its stabilization fund to complicated its IMF standby 14 Argentina Amado Boudou/Hernán Lorenzino support a large fiscal program agreement and it missed its 15 Venezuela Jorge Giordani in 2009, although relative to IMF targets. Source: LatinFinance GDP, the public sector’s assets Argentina’s reducing remain below 2008 levels. subsidies was the best policy Mexico and Brazil follow the top four. even if some in the markets are beginning decision to come out of the country last In Mexico, it’s too early to say for certain year, suggests Credit Suisse’s Sandy, to expect better discipline from an what Finance Minister José Antonio adding that the move will be good news in investment grade credit. It was looking Meade’s legacy will be, as he just came terms of not only fiscal spending but also at a 2.0% deficit for 2011, and has been into the position in September, following increasing overall efficiency. innovative with its liability management. Ernesto Cordero stepping down in With elections upcoming in October, October to pursue a run for president. Mixed Reviews for CentAm Venezuela has seen primary spending Brazil entered 2011 following Panama diversified its debt, raising funds surge. Financial expenditure is rising significant election spending in 2010, with for the first time from Japanese bond rapidly, with a temporary economic uncertainty around whether spending cuts investors, and has also made efforts to tailwind expected as private investment would materialize. The markets still have develop the local debt market. However, lags behind. Key to Venezuela’s future a bad taste in their mouth following the it is criticized for squandering surging will be oil production and also the rate at government’s unpopular measures to stop tax revenues, as what once was a 4%-5% which the country moves toward a more the appreciation of the real. But inflation primary surplus has dwindled down business friendly policy environment. LF is beginning to fall and the government did make good on its fiscal spending as it relates to fiscal surplus targets, says Tony Volpon, head of emerging markets research at Nomura. “After much skepticism given what happened in 2010, they really delivered the numbers in 2011 in a slowing economy, and it’s always harder to do that,” he said. “I think [finance minister Guido Mantega] converted a few people.” Panama’s efforts to keep the deficit in check amid high growth make it a standout among the smaller economies,

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March/April 2012

Latin Finance - March/April 2012

Table of Contents for the Digital Edition of Latin Finance - March/April 2012