Flight Capital Flowing Back to Latin America
LONDON -- Wealthy Latin Americans, encouraged by economic revival at home, are increasingly bringing back the money they had quietly stashed abroad during the height of region's debt crisis in the mid-1980s.
The return of this offshore capital, once lodged for safety in financial centers from Miami to Switzerland, marks a major vote of confidence in Latin America's recovery, say bankers.
And while the withdrawal of the cash from U.S. and foreign banks is disappointing for these institutions, the banks are generally being compensated by acting as middle men in the investments flowing back to Mexico, Brazil, Colombia, and other nations.
Signal from Mexico
Latin Americans had an estimated $300 billion in the United States alone by the late 1980s, according to analysts.
The recovery in Latin America, helped by the Brady plan for resolving the debt crisis, is being signaled most strongly by Mexico. Its foreign monetary reserves hit an all-time peak of $16.2 billion in September, up $6 billion since the end of 1990.
The latest rise reflects stock and bond purchases with repatriated Mexican capital, including the buying of shares in Telmex, the government telephone company, Mexican officials say.
The decline in interest rates in the United States has also brought a shift to higher-yielding Latin money markets.
Elsewhere, Argentina is estimated by bankers to have enjoyed inflows of around $500 million so far this year. In Brazil, central bank officials estimated that $6.8 billion has returned to the country in the first six months of 1991.
Indigestion in Colombia
And so much capital was flowing back into Colombia this year that the authorities discouraged Colombians from switching dollars into pesos.
For foreign banks, handsome profits are being made in intermediating these inflows through the markets for the debt of lesser-developed countries as well as regional stock and bond markets, say bankers. Trading in the market for Latin American debt has climbed sharply - to a rate of about $200 billion a year.
Many of the new players are individuals and institutions wanting to invest in their nations' foreign obligations at deeply discounted values, say bankers.
New Profile for Buyers
The LDC debt market is maturing, according to Rick Haller, a director of London investment bank Morgan Grenfell. "Instead of the odd Latino individual with $1 million in his bank in Miami, the new buyers are institutional investors and funds."
Mr. Haller says the single most important development in LDC trading has been the return of investors' confidence in the region.