Combined use of foreign debt and currency derivatives under the threat of currency crises: The case of Latin American firms

► We examine why emerging market firms use foreign debt and currency derivatives. ► We focus on a volatile exchange rate context of Latin American firms in early 2000s. ► Country specific factors explain part of firms' foreign leverage and hedging policy. ► Foreign debt is used by firms for hedging and speculation in the long-term. ► Currency derivatives are used for short-term hedging mainly in the post crisis era.