2015 All-Latin America Research Team: Sovereign Debt, No. 1: Jane Brauer, Claudio Irigoyen & team

<The 2015 Latin America Research Team
Jane Brauer, Claudio Irigoyen & teamBank of America
Merrill LynchFirst-Place Appearances: 3

Total Appearances: 15

Team Debut: 1993

Jane BrauerandClaudio Irigoyenguide their Bank of America Merrill Lynch squad to a third consecutive No. 1 finish. The three New York–based researchers deliver “complete coverage across the universe,” observes one investment manager, “with specialists focused on specific segments.” Irigoyen also co-captains, with David Beker, a crew that repeats in second place on the Local-Markets Strategy roster. He advises that U.S. monetary policy normalization and European rates volatility are “inducing investors to reduce risk exposure.” At the same time, Latin American economies are facing three key concerns, he notes: “the deterioration of the capacity to pay in Venezuela, in part explained by the dynamics of oil prices; the upcoming elections in Argentina; and the macroeconomic adjustment undertaken by Brazil to preserve its investment-grade status.” Given the short-term political risks and high yields in Argentina, BofA Merrill’s analysts assign the country’s credits a market weight rating, favoring the Bonar 2017 bonds, which are dollar-denominated securities sold under domestic law. Similarly, macroeconomic uncertainty and distressed valuations inform their market weight stance in Venezuela, where they recommend swapping into high-coupon bonds “as the downside is limited in case of default,” Irigoyen adds. Despite economic headwinds in Brazil, the researchers also advocate a market weighting on its credits, citing attractive spreads against regional investment-grade debt. In Chile, Colombia and Mexico, they likewise expect sovereigns to perform in line with expectations. Peru, however, they recommend underweighting, owing to its slowing growth and exposure to external shocks. Finally, strong fundamentals, government action to reduce the national deficit and higher long-term spreads win Uruquay’s credits an overweight rating.