By Sudip Chatterjee, Head of Global Capital Markets, Euroclear

A step-by-step process

The World Bank study stresses that strategy should come first in dictating where and in what currency a country should borrow.

Nevertheless, when a market is at the first or second phase, the options available for designing a comprehensive strategy is limited.

However, when the market attains the ability to operate in all the four phases, they can design a comprehensive borrowing strategy in line with their macro-economic objectives like monetary policy and fiscal discipline.

Euroclearability is key

Having the right conditions in the market to achieve the phase 4, has been coined by the international investor community as being ‘Euroclearable’. At Euroclear, we have helped a number of Latin American markets – Peru, Chile, Argentina and Mexico among them – travel this path. Making their markets ‘Euroclearable’ has been a material factor in helping them reach the final stage of the process when they can attract international investors into their domestic market securities.

The drive for Euroclearability often comes not from the sovereign issuer but from the international investors, since they see Euroclearability as a necessary precondition for their participation in any domestic issue.

Making the domestic market Euroclearable can set off a virtuous circle in increasing liquidity, creating stability and reducing borrowing costs – which are recognised by major local currency indices in increasing their weightage in local bonds. This is something that both Chile and Peru have experienced.

Each of the phases contribute cumulatively to making funding more accessible and providing the right levers to the sovereign issuers to manage their strategies to create long-term social and economic development for their markets.

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Sudip Chatterjee

Sudip Chatterjee is Head of Global Capital Markets at Euroclear. He is responsible for defining and designing the vision and strategy, along with aligning all business initiatives across the global capital markets business line of Euroclear.