Jamaica at credit risk ­ Standard & Poor's

INTERNATIONAL CREDIT rating agency, Standard & Poor's, said on Friday that investor uncertainty following the aerial attacks on the United States would inevitably curtail Jamaica's and other emerging markets' access to the international capital markets, according to a Reuters report.

The ratings agency said it was reviewing the financial contingency plans of policymakers in emerging market countries with significant cross-border borrowing needs.

But Wall Street analysts immediately dismissed the warning as being premature.

"Standard & Poor's expects that investors will become more risk-averse during this period of heightened political tension. It is difficult to predict how long these uncertainties might last, but as long as they do they will inevitably raise the cost and curtail the availability of cross-border debt financing in many emerging market countries," said David Beers, managing director of Standard & Poor's Sovereign and International Public Finance Ratings group.

S&P said Argentina, Brazil, Turkey and Lebanon face large funding gaps in relation to foreign exchange reserves. Other sovereigns vulnerable to reduced access to the global capital markets were Colombia, the Philippines and Jamaica.

Wall street analysts reacted angrily to the S&P statement.

"At a time like this it is very easy to come up with apocalyptic pronouncements, but I find it completely irresponsible to do so," said Arturo Porzecanski, head of emerging markets economic and debt strategy at ABN-AMRO Inc.

Walter Molano, head of research at BCP Securities, a Latin American broker-dealer based in Greenwich, Connecticut, used similar words: "It is reckless for S&P to say this so soon after the disaster."

Last Tuesday's terror attacks that destroyed New York's World Trade Center and damaged the Pentagon severely rattled financial markets already concerned over the health of the U.S. and world economies.

Short-term U.S. Treasury yields hit historic lows on Friday, the dollar fell sharply and investors rushed into safe-haven assets such as the Swiss franc, gold and oil.

While it is true that investors will probably reduce exposure to riskier emerging market assets, Porzecanski said "the issue that investors are struggling with these days is 'where is safety to be found?' Previously it was assumed that U.S. assets were relatively safe. But now one can question whether Argentine bonds, to choose an extreme example, are all that safer than U.S. airline or insurance company stocks," he said.

Porzecanski agreed, however, that the market for new emerging market sovereign bonds would be shut down for some time, and that planned debt issuance by Chile and the Dominican Republic would likely be postponed.

Molano suggested that the financial community would be wise to withhold judgement about which emerging countries will or will not suffer in the coming months.

"If we go to war, commodity prices might go through the roof and Latin America's role in the global economy is as a commodities producer," Molano said. "It's too soon to predict anything."

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