Debt Capital Markets (DCM) Program

Development of local bond markets contributes to deepen the financial system and increases countries’ resilience to the reversal of capital flows during periods of financial instability; capital markets help mobilize domestic savings for financing long-term investments reducing dependency on external borrowing. Latin America and the Caribbean countries (“LAC”) lag other emerging markets regions in terms of capital market development, namely in private sector participation. LAC corporate bond issuances represent only 33% of GDP vs. East Asia with 95% and Eastern Europe with 43%. Corporate bond markets in LAC are also characterized by a high concentration in highly rated companies (AA rating or above), lack of liquidity, small size of corporate issuances and shorter maturities than sovereign bonds.

The IDB Group is seeking to support LAC private sector issuers1 in accessing Debt Capital Markets financing with two products both in local currency and USD: (i) partial credit guarantees (“PCGs”) that will act as credit enhancement to meet local institutional investors’ risk appetite and rating requirements; and (ii) the subscription of debt securities2 which is expected to act as “seal of quality” to boost investors’ confidence. Private sector issuers are expected to benefit from bond issuances as they provide a more diversified base of financing, and better financial terms (longer maturities, larger ticket sizes, etc.). The Program is expected to contribute to deepen financial systems of LAC.

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1 Private sector issuers include: Corporates, Financial Intermediaries, Special, Purpose Vehicles, and any other entity eligible to receive financing in accordance to IDB Group policies.

2 Debt securities are debt instruments issued by corporates, financial institutions, sub-nationals entities, included among others: bonds, notes, debentures, certificates, commercial paper that are traded in the capital markets.