Abstract
More than one decade after the external debt restructuring (the Brady Plan), a great amount of literature has been published concerning the balance sheet factors in developing countries. The staff of international multilateral institutions joined with reputable academics in this great controversy. The external debt problem of the developing countries is back and once more reflections on its cause and on policy recommendations are analytically distinct. Our main task is to reflect on the recent external debt dynamics and assess how this debt has evolved. Our findings indicate that the susceptibility of some developing countries to default is associated with global imbalance, that is, the way they borrow.
Highlights
Even though programs of debt restructuring took place in the late 1980s and in the early 1990s, the total external debt has increased in most developing regions
HIPCs (Heavily Indebted Poor Countries) have experienced constancy in their external debt, and the reason for this is directly associated with the programs designed to relieve these poor nations; and, since low income per capita countries are part of the HIPCs, the chart illustrates a relatively stable expansion of the external debt of these economies
Taking three canonical examples of external debt problems (Brazil, Argentina and Mexico), the debt agreements and restructuring according to the Brady Plan have not been able to overcome that external constraint
Summary
More than one decade after the external debt restructuring (the Brady Plan), a great amount of literature has been published concerning the balance sheet factors in developing countries. The staff of international multilateral institutions joined with reputable academics in this great controversy. The external debt problem of the developing countries is back and once more reflections on its cause and on policy recommendations are analytically distinct. Our main task is to reflect on the recent external debt dynamics and assess how this debt has evolved. Our findings indicate that the susceptibility of some developing countries to default is associated with global imbalance, that is, the way they borrow. Key-words: External Debt, Developing Countries, Original Sin, Debt Sustainability Assessment.
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