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Easy global liquidity conditions, stronger risk appetite and a retrenchment in cross-border bank lending led to a surge in emerging market firms’ bond issuance in international markets (what we term “The Bon(d)anza”). Using firm-level data for five large Latin American economies, we provide evidence of a significant change in companies’ external funding strategies and liability structures after 2010, as well as in the balance sheet risks that firms face. We find that stepped up bond issuance was mostly aimed at re-financing rather than funding investment projects, as firms extended the average duration of their debt while securing lower fixed-rates, reducing roll-over and interest rate risks. The shift towards safer maturity structures has come at the expense of a leveraging-up in foreign-currency-denominated financial debt in several countries— reversing a de-dollarization trend seen during the last decade. We also provide evidence that a substantial part of these bonds were issued through offshore vehicles, suggesting regulatory and tax arbitrage strategies. For some corporations, rising dollar debt and high leverage will be particularly taxing in an environment of US dollar strengthening, less buoyant commodity prices and slowing domestic activity.

Corporations --- Corporate debt --- Bonds --- Capital market --- Financial risk --- Financial statements --- Balance sheets --- Corporate financial statements --- Earnings statements --- Financial reports --- Income statements --- Operating statements --- Profit and loss statements --- Statements, Financial --- Accounting --- Bookkeeping --- Business records --- Corporation reports --- Business risk (Finance) --- Money risk (Finance) --- Risk --- Capital markets --- Market, Capital --- Finance --- Financial institutions --- Loans --- Money market --- Securities --- Crowding out (Economics) --- Efficient market theory --- Bond issues --- Debentures --- Negotiable instruments --- Debts, Public --- Stocks --- Debt --- Debt financing (Corporations) --- Business corporations --- C corporations --- Corporations, Business --- Corporations, Public --- Limited companies --- Publicly held corporations --- Publicly traded corporations --- Public limited companies --- Stock corporations --- Subchapter C corporations --- Business enterprises --- Corporate power --- Disincorporation --- Trusts, Industrial --- Finance. --- Exports and Imports --- Investments: General --- Investments: Bonds --- Money and Monetary Policy --- Financing Policy --- Financial Risk and Risk Management --- Capital and Ownership Structure --- Value of Firms --- Goodwill --- International Financial Markets --- Financial Markets and the Macroeconomy --- General Financial Markets: General (includes Measurement and Data) --- Monetary Systems --- Standards --- Regimes --- Government and the Monetary System --- Payment Systems --- Public Administration --- Public Sector Accounting and Audits --- International Lending and Debt Problems --- Investment --- Capital --- Intangible Capital --- Capacity --- Investment & securities --- Monetary economics --- Financial reporting, financial statements --- International economics --- Macroeconomics --- Currencies --- Debt service --- Depreciation --- Money --- Public financial management (PFM) --- External debt --- National accounts --- Finance, Public --- Saving and investment --- Brazil

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We combine state-level fiscal data with household survey data to assess the links between sub-national fiscal policy and income inequality in Brazil over the period 1995-2011. The results indicate that a tighter fiscal stance at the sub-national level is not associated with a deterioration in inequality measures. This finding contrasts with the conclusions of several papers in the burgeoning literature on the effects of fiscal consolidation on inequality using national data for OECD economies. In addition, we find that a tighter stance is typically positively associated with a measure of “shared prosperity”. Hence, our results caution against extrapolating policy implications of the literature focusing on advanced economies to other settings.

Economic development. --- International finance. --- International monetary system --- International money --- Finance --- International economic relations --- Development, Economic --- Economic growth --- Growth, Economic --- Economic policy --- Economics --- Statics and dynamics (Social sciences) --- Development economics --- Resource curse --- Macroeconomics --- Public Finance --- Distribution: General --- Economic Growth and Aggregate Productivity: General --- Macroeconomic Analyses of Economic Development --- Aggregate Factor Income Distribution --- Fiscal Policy --- National Government Expenditures and Related Policies: General --- Public finance & taxation --- Income inequality --- Fiscal stance --- Expenditure --- Fiscal consolidation --- Fiscal policy --- National accounts --- Income distribution --- Expenditures, Public --- Brazil