The bankruptcy of the Californian bank Silicon Valley Bank (SVB) and the New York Signature Bank had an uneven impact in Latin America on Monday. The five largest economies in the region, Brazil, Mexico, Colombia, Chile and Argentina, have a different capacity for resistance and reaction to financial turmoil, but nervousness over the consequences of a banking crisis swept the entire region. There were stock market falls and in Chile there was a depreciation of the peso against the dollar. This is how the collapse of these entities and the response of the Joe Biden Administration have had an impact, who sent a message of tranquility by highlighting the solidity of the system and by ensuring that deposits are safe.
In Brazil, investors and the authorities were on Monday awaiting the effects of the bankruptcy of the two US banks. Finance Minister Fernando Haddad declared that the evolution of the situation will determine whether the Central Bank of Brazil should take any action in this regard. “I don’t know if it will generate a systemic crisis, apparently not. I have not seen anyone treat this episode like Lehman Brothers. But the fact is that what happened is serious”, affirmed the minister at an event on the tax reform, whose approval period is being extended with the passing of the weeks and has been set for next October. Interest rates are, to the chagrin of the government of Luiz Inácio Lula da Silva, at 13.75%. The São Paulo Stock Exchange started the day with a strong fall, but it has recovered somewhat and at the end of the afternoon it lost 0.3%, while the dollar rose almost 1%.
In Mexico, the main stock index began to fall on Friday, when the news broke that SVB was in the hands of the authorities. However, on Monday, both the stock market and the exchange rate stabilized after the promise that the Biden government guarantees deposits. The most affected were some national banks, such as Banorte, which had losses of close to 6% between Friday and Monday.
The week has started with a depreciation against the dollar of the Chilean currency. The greenback closed higher than 800 Chilean pesos, waiting for the United States to publish inflation for February this Tuesday. It was a session of high volatility that was experienced in the exchange day. Certain local factors pushed the exchange rate down. While the Central Bank will tender this week contract renewals forward or in the long term of selling dollars for 3,455 million, the Treasury sold dollars for 100 million in the spot market or in cash. It has space to sell, additionally, another 500 million dollars if one considers the Treasury announcement last week. Both factors give the market liquidity, calm the rises in the American currency and accelerate falls, specialists have explained.
The IPSA, the main stock market index in Chile, prepared by the Santiago Stock Exchange, this Monday closed with losses: it fell 1.05% during the day. Only five of its 29 shares closed higher. The biggest losses were suffered by two banks, Santander (-3.4%) and BCI (-2.83%). In addition, according to what was reported by the Chilean press, several national startups had accounts at Silicon Valley Bank. Some only managed to get their funds.
A 2.06% drop in the main index of the Colombian Stock Market, the MSCI Colcap, shows that the bankruptcy of two banks in the United States has already affected the Colombian market as well. The risk that these bankruptcies, the largest since the 2008 crisis, infect the rest of the American financial sector has three medium-sized banks in its sights. The repercussion was, in any case, worldwide: the Japanese Nikkei fell 1.11% this Monday, the Euro Stoxx 50 fell 3.46% and the Ibex 35 fell 3.51%. Ultimately, it has helped the Colombian market to be in the same time zone as the United States. The presidential intervention and the announcement of various measures have boosted the main indices of the US stock markets.
In line with the collapse of the main stock markets in the world, the one in Buenos Aires already closed on Friday with a drop of 4.73% dragged down by the bankruptcy of Silicon Valley Bank. Shares of energy carrier Transener, down 8.49%, and state oil company YPF, down 7.29%, were the companies in the S&P Merval index that felt the biggest hit.
The high aversion to risky assets triggered by the bankruptcy of the US bank caused dollar-denominated bonds to plummet: the Global 2038 yielded 7.1%; Global 2046, 3.7%; and Bonar 2041, 1.8%. In New York, Argentine titles fell by up to 5.2% (Bonar 2029). These falls triggered the country risk 1.8% to 2,322 basis points, after having reached 2,444 points at the opening of the markets, the highest figure in five months.
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