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Corporate debt in Latin America and its macroeconomic implications

Author

Listed:
  • Esteban Pérez Caldentey
  • Nicole Favreau Negront
  • Luis Méndez Lobos

Abstract

This article provides an empirical analysis of nonfinancial corporate debt in six large Latin American countries (Argentina, Brazil, Chile, Colombia, Mexico, and Peru), distinguishing between bond-issuing and nonbond-issuing firms, and assessing the debt’s macroeconomic implications. The paper uses a sample of 2,241 firms listed on the stock markets of their respective countries, comprising 34 sectors of economic activity for the period 2009–2016. On the basis of liquidity, leverage, and profitability indicators, it shows that bond-issuing firms are in a worse financial position relative to nonbond-issuing firms. Using Minsky’s hedge/speculative/Ponzi taxonomy for financial fragility, we argue that there is a larger share of firms that are in a speculative or Ponzi position relative to the hedge category. Also, the share of hedge bond-issuing firms declines over time. Finally, the article presents the results of estimating a nonlinear threshold econometric model, which demonstrates that beyond a leverage threshold, firms’ investment contracts while they increase their liquidity positions. This has important macroeconomic implications since the listed and, in particular, bond-issuing firms (which tend to operate under high leverage levels) represent a significant share of assets and investment. This finding could account, in part, for the retrenchment in investment that the sample of countries included in the paper have experienced in the period under study and highlights the need to incorporate the international bond market in the analyses of monetary transmission mechanisms.

Suggested Citation

  • Esteban Pérez Caldentey & Nicole Favreau Negront & Luis Méndez Lobos, 2019. "Corporate debt in Latin America and its macroeconomic implications," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 42(3), pages 335-362, July.
    • Handle: RePEc:mes:postke:v:42:y:2019:i:3:p:335-362
    DOI: 10.1080/01603477.2019.1616563
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    Cited by:

    1. Bibi, Samuele & Chandorkar, Pankaj Avinash, 2025. "Minsky in Peru-unveiling the hidden financial fragility at a sectoral level," Structural Change and Economic Dynamics, Elsevier, vol. 73(C), pages 77-88.
    2. Lorenzo Nalin & Giuliano Toshiro Yajima & Leonardo Rojas Rodriguez & Esteban Perez-Caldentey & Jose Eduardo Alatorre, 2023. "A Stock-Flow Ecological Model from a Latin American Perspective," Economics Working Paper Archive wp_1031, Levy Economics Institute.
    3. Alberto Botta & Giuliano Toshiro Yajima & Gabriel Porcile, 2023. "Structural change, productive development, and capital flows: does financial “bonanza” cause premature deindustrialization?," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 32(2), pages 433-473.
    4. Botta, Alberto & Spinola, Danilo & Yajima, Giuliano & Porcile, Gabriel, 2023. "Pasinetti, Debt Sustainability and (Green) Structural Change at the Time of Global Finance: An Emerging and Developing Countries’ Perspective," CAFE Working Papers 25, Centre for Accountancy, Finance and Economics (CAFE), Birmingham City Business School, Birmingham City University.
    5. Fattouh, Bassam & Pisicoli, Beniamino & Scaramozzino, Pasquale, 2024. "Debt and financial fragility: Italian non-financial companies after the pandemic," Economic Modelling, Elsevier, vol. 131(C).
    6. Samuele Bibi & Luis Villanueva & Christian Bucio, 2025. "Mexico: A Minskyian case of financial fragility shaken by Covid-19," Journal of Evolutionary Economics, Springer, vol. 35(5), pages 901-934, November.
    7. Botta, Alberto & Porcile, Gabriel & Spinola, Danilo & Yajima, Giuliano Toshiro, 2023. "Financial integration, productive development and fiscal policy space in developing countries," Structural Change and Economic Dynamics, Elsevier, vol. 66(C), pages 175-188.
    8. Li, Xiao-Lin & Qu, Wentian & Qiu, Guojing, 2025. "How does non-financial firms' systemic risk affect their credit constraints? Evidence from China," China Economic Review, Elsevier, vol. 94(PB).
    9. Eduardo Mantoan & Vinícius Centeno & Carmem Feijo, 2021. "Why has the Brazilian economy stagnated in the 2010s? A Minskyan analysis of the behavior of non-financial companies in a financialized economy," Review of Evolutionary Political Economy, Springer, vol. 2(3), pages 529-550, December.
    10. Giuliano Toshiro Yajima & Lorenzo Nalin, 2022. "Financial Barriers to Structural Change in Developing Economies: A Theoretical Framework," Economics Working Paper Archive wp_1004, Levy Economics Institute.
    11. Engelbert Stockhammer & Giorgos Gouzoulis, 2023. "Debt-GDP cycles in historical perspective: the case of the USA (1889–2014)," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 32(2), pages 317-335.
    12. Esteban Ramon Perez Caldentey & Lorenzo Nalin & Leonardo Rojas, 2022. "A baseline stock-flow model for the analysis of macroprudential regulation for Latin America and the Caribbean," Working Papers PKWP2217, Post Keynesian Economics Society (PKES).
    13. Mbondo, Georges Dieudonné & Bouwawe, Duclo, 2023. "Transformation structurelle des pays à revenu faible et intermédiaire en Afrique Sub-saharienne : quels rôles des flux des capitaux internationaux ? [Structural transformation of low- and middle-income countries in Sub-saharan Africa: what role fo," MPRA Paper 117911, University Library of Munich, Germany, revised 11 Jul 2023.
    14. Kadırgan, Can, 2023. "Exchange rate driven balance sheet effect and capital flows to emerging market economies," The Quarterly Review of Economics and Finance, Elsevier, vol. 87(C), pages 35-45.
    15. Esteban Pérez Caldentey & Matías Vernengo, 2024. "A Financially Driven Business Cycle for Latin America and the Caribbean," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 77(1), pages 5-36.
    16. Vladan Pavlovic & Goranka Knezevic & Antonio Andre Cunha Callado, 2022. "Is the Corporate Solvency Conundrum Primarily a Balkan Issue or a Broader European Continental Misunderstanding?," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 1, pages 72-93.
    17. Yajima, Giuliano Toshiro & Nalin, Lorenzo, 2024. "Technological lock-in developing countries: The role of external financing," Structural Change and Economic Dynamics, Elsevier, vol. 70(C), pages 494-502.

    More about this item

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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