Ana Giraldo, Associate Director of Thomas Murray Data Services

Monday 22nd September, 2014

The effects of the Argentine bond crisis will be felt later

Ana Giraldo believes that the risks from Argentina will not impact Chile

By Nicolas Marticorena

The associate director of the international consulting firm Thomas Murray, Ana Giraldo, was in Santiago a few weeks ago to provide an analysis on the A+ rating that Thomas Murray recently issued to Chile's Deposito Central de Valores (DCV).

In this context, she described the financial threats in the region that could eventually put at risk the rating given to the service provider of the Chilean capital markets.

"In terms of asset safety, the region has significant strengths given that countries such as Brazil, Colombia and Peru, use segregated accounts at the beneficial owner level. Therefore, brokers and banks cannot hold their clients' assets in a single account, but they must be fully segregated: The investor knows that their assets cannot be used without their permission", she indicates.

However, she warns that some of the weaknesses in the region include "in small markets like Paraguay and Uruguay, there are still lots of physical securities, with higher probability of loss. A central securities depository such as the one in Chile is yet to be implemented and that increases the risk significantly".

Ana Giraldo says that the capital infrastructure in Chile should be improved.

Giraldo also analyses the impact of Argentina's inability to pay interests on its restructured debt as a result of its legal battle with those bondholders that did not agreed the deal offered by Argentina after its 2002 default. "Argentina is a very peculiar case, but the financial situation of the government is not necessarily related to its capital markets infrastructure, which is good. In fact, its central securities depository has been fundamental in helping the government undertake all those debt exchanges prior to this default".

She adds, "but I believe that despite having a good infrastructure in place, the default will have a significant impact on the country's financial situation due to the decrease in foreign investment in the country. The effects of the Argentina bond crisis will be felt later, not now. In any case, I do not see any direct impact on Brazil or Chile".

Challenges in the country

Giraldo goes on to highlight that the Chilean capital market is one of the most developed in the region, and the DCV rating is at the same level as its Mexican peer. But she considers that there are some weaknesses in Chile that can be improved to increase the level of asset protection to investors. "There is scope for improvement. I would think that the account structure, that is still mainly omnibus (grouped), I mean, whereby brokers can maintain clients' securities in a single account, is an area that could be improved", she concludes.

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For further information contact:

Ana Giraldo
Associate Director
Thomas Murray Data Services

Tel: +44 (0) 20 8600 2300

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