Economy – How would Evergrande’s bankruptcy impact Latin America?

First modification: 10/02/2021 – 04:27

The Asian giant Evergrande continues to circumvent interest payment deadlines on its debt of more than 300,000 million dollars as the world watches its decline in real time. Several economists rule out a global contagion like the one that occurred during the 2008 crisis, although this crisis sets a new warning.

A battle with time. The real estate crisis caused by the lack of liquidity of the Chinese giant Evergrande will have limited consequences according to analysts, but it is a warning for world markets.

The debt that Evergrande carries amounts to more than 300,000 million dollars, of which 37,000 are loans to be repaid before the end of the first half of 2022.

Despite the delay and calls in agreement with the bondholders, it cannot be said that the company incurred defaults until 30 days after the expiration date.

Evergrande, founded in 1996, showed its debt to the world after several Chinese regulations to the sector to control its expansion, forcing it to reduce liabilities and offer ever greater discounts to maintain liquidity.

“We estimate that Evergrande had about 1.3 trillion yuan ($ 201.165 million) in pre-sale obligations, which is equivalent to 1.4 million real estate that it had committed to complete,” said British consultancy Capital Economics. .

A man rides an electric bicycle past the construction site of the Guangzhou Evergrande Football Stadium, a new stadium for Guangzhou FC developed by China Evergrande Group, in Guangzhou, China’s Guangdong province, on September 26, 2021. © Aly Song / Reuters

Could the bankruptcy of this company affect the Latin American markets?

For the economist Alejandro Godoy, a specialist in Asian studies, the fall of Evergrande will shake the markets, but he discards the theory of a collapse similar to that of 2008. According to him, economies such as Chile, Peru, Brazil, Venezuela and Colombia will suffer the fall of the giant Asian.

“Latin American economies keep pace with raw materials and what we call commodities. Above all, there is a group that could be more at risk than others. There we see Peru, Chile and Brazil, because they are the ones who sell the most construction material to companies from China, “Godoy said.

For the expert, Colombia and Venezuela would also be affected “because they are economies that live off the oil issue.” Evergrande is part of the Global 500, a group where the world’s largest companies converge. In China it employs about 200,000 people and generates indirect jobs annually for 3.5 million people each year.

With EFE

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source https://pledgetimes.com/economy-how-would-evergrandes-bankruptcy-impact-latin-america/