Latin America and Caribbean to borrow less in 2006, says S&P

By Reshmi Basu

New York, Jan. 31 - Sovereign borrowings from Latin America and the Caribbean will ease slightly in 2006, according to a Standard & Poor's report released on Tuesday.

"The reduction in gross borrowing reflects both prepayments of official funding by many countries in 2005 and prefunding of external commercial debt that is scheduled to mature in 2006," said Joydeep Mukherji, credit analyst, in the report.

The ratings agency expects that long-term borrowing, which includes official and commercial debt, could reach $290 billion this year, as compared to $295 billion last year.

Additionally, 92% of this year's borrowings are likely to come from commercial sources as compared with 88% in 2005. The remaining will come from official bilateral and multilateral lenders.

Commercial debt issuance will most likely reach $267.4 billion in 2006 compared with $259.4 billion in 2005, the agency forecast.

Sovereigns in Latin America and the Caribbean will make up around 5.8% of total global sovereign debt issuance in 2006, coming in line with last year's 5.5%.

Within the region, Brazil will continued to be the biggest borrower, accounting for about 48% of debt issued, followed by Mexico with 15%, Argentina with 12.6% and Colombia with 5.5%.

"Standard & Poor's survey highlights the diminishing role of official sector funding for the region, which is likely to remain at about half the level of expected inflows of both foreign direct investment and workers' remittances," said Mukkerji.

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