J.P. Morgan & Co. has arranged the first Latin American corporate bond denominated in euros: a $165 million, five-year issue for Telecom Argentina STET France.

The issue by the Argentine telephone company was increased to $165 million, from $137.5 million, after it was oversubscribed.

Observers said the strong investor interest is a sign of renewed confidence in Latin America, which lost favor amid a massive devaluation in Brazil this year and sharp economic downturns in several nations. (See story on page 30.)

"Investors are starting to differentiate between credits and are less concerned about a blowout in Brazil having an effect elsewhere," said Alex Antebi, vice president for Latin American capital markets at J.P. Morgan.

Bankers also noted that as investors resume buying Latin American paper, yields are tumbling. According to Morgan's emerging market bond index, the average interest rate paid by an emerging market borrower has fallen from around 14% in January to less than 11%.

Friday's issue by Telecom Argentina comes on the heels of Thursday's successful $500 million bond issue by Panama and a $1 billion issue by Mexico underwritten by Morgan Stanley Dean Witter. The Panama issue was also underwritten by J.P. Morgan, together with Salomon Smith Barney, a unit of Citigroup Inc.

Panama is the fourth Latin American country to return to international bond markets since investors began fleeing Latin America in August after Russia's financial markets collapsed.

This month, Citigroup Inc. vice chairman William Rhodes predicted at a press conference during the InterAmerican Development Bank's annual meeting in Paris that the Brazilian government may also soon be able to resume issuing international bonds.

"I'm optimistic that Brazil will be able to access international markets by the end of April," Mr. Rhodes said. He said he sees growing confidence that the Brazilian government will implement its economic policies.

Latin America has suffered a devastating credit crunch as commercial banks cut lending to the region and private investors pulled funds out. Total private capital flows including loans from foreign banks fell to $83 billion in 1998, from $106 billion in 1997, according to data from the Institute of International Finance, a Washington think tank.

Though new bond issues by Latin borrowers rose to $37 billion in 1998, from $26 billion in 1997, bond issues collapsed in the second half of last year amid a capital flight from the region.

In a further sign that confidence in the region is returning, Brazil's Banco Bradesco SA issued a $150 million Eurobond last week through Merrill Lynch & Co.

Banco Itau SA, another Brazilian bank, and the Brazilian banking units of Citigroup Inc. and ABN Amro NV are also said to be considering issuing bonds along with Chile and Peru.

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