World Debt Research Articles

The Two Faces of Third World Debt: A Fragile Financial Environment and Debt Enslavement

Falstaff: I can get no remedy against the consumption of the purse: borrowing only lingers and lingers it out, but the disease is incurable. King Henry IV, Part II. The tremors that shook the financial world during 1982 and most of 1983 have for the time being subsided. But the ensuing calm is an uneasy one: clearly, the crisis has merely been postponed to another day.This article can also be found at the Monthly Review website, where most recent articles are published in full.Click here to purchase a PDF version of this article at the Monthly Review website.

La configuration Nord-Sud du commerce des produits alimentaires: Un essai prospectif et une expérience d’histoire économétrique.

ABSTRACTAll the econometric studies on world food prospects lead to the picture of an increasing food trade deficit in the Third World. We discuss here this topic using a more global approach based on a general equilibrium framework covering the whole World Economy and involving disagregated rural and urban sectors. With this model, we analyses the impacts of Third World demography and debt, oil price, rural productivity and developed region growth. The model finds that the food trade in 1960 to 1995 is highly sensitive to these variables. The oil shocks and the resulting economic stagnation in the industrialized countries has broken trade patterns that were supposed to bring welfare to LDCs. These implied a North to South food trade balanced by a South to North manufactured trade. To sustain 5 percent growth in shrinking industrial world markets, the Third World, and especially the semi-industrialized countries, would be forced to « export urban hunger ». At the end of the century, food would flow from South to North, in the opposite direction from what has been unanimously predicted by other studies.

Research Communication: The Military Related External Debt of Third World Countries

The structure of arms imports financing has changed considerably in the past. While in the fifties and sixties grants prevailed, in the seventies credits and cash-payments became most important. It is not possible to indicate how much of arms credits were included in available debt statistics. Anyhow, some theorizing has led to the conclusion that direct military credits might not be such an interesting indicator if we are interested in the total burden imposed on Third World countries through the credit financing of arms imports. I have therefore introduced an 'opportunity cost' assessment. Both from direct payment statistics and my indirect estimates, I conclude that in the second half of the nineteen seventies credit payments became the most important financing source of arms imports. Measured indirectly, in the second half of the seventies, more than half of all arms imports in the Third World were credit financed. The opportunity cost burden of military credits in the second half of the seventies rose to about 20 to 30% of all real inflow of debt to Third World countries. Had the Third World countries importing debt capital in 1979 not imported arms in 1979, the net transfers of debt could have been up to 20 to 30% lower. The opportunity cost burden of accumulated debt over time is estimated at around 20% of the total Third World debt burden for 1979. For the same year, I estimate that interest in amortization of old debt added up to more than twice the cost of new weapon imports for credit importing countries. The fast rising credit burden of arms imports adds a very important dimension for the burden measurement of Third World arms imports.

Latin American Debt: What Kind of Crisis?

LATIN AMERICAN DEBT: WHAT KIND OF CRISIS? Barbara Stailings J.hird World debt is widely regarded as one of the principal problems facing the world economy today. The total volume of the debt is now around $600 billion, up from only $100 billion a decade ago.1 About two thirds ofit is owed to the private banks, which typically make loans on the basis of a floating interest rate. The combination of rapidly growing debt and floating rates means that borrowing countries have been paying increasingly large percentages of their export revenues for debt service. For a substantial number, the burden has proved too heavy, and reschedulings have been sought. Although the "scare scenario" that predicts defaults leading to the imminent collapse of the international financial system is clearly exaggerated, serious problems do exist. Some concern the safety of the banking system. Others center on the adverse consequences for world growth if the import capacity of Third World countries is sharply curtailed. Finally, political and economic crises threaten to engulf the Third World itself if external finance is restricted too much, leading to economic depression in those countries. Looking beyond superficial generalities, it is clear that the so-called Third World debt problem is essentially a Latin American problem. About half of all Third World debt is owed by Latin American countries; 1 . There is substantial variation on estimates for total Third World debt, ranging at least between $500 and $700 billion. These figures come from OECD, External Debt ofDeveloping Countries (Paris: OECD, 1982). Barbara Stallings is associate professor of political science at the University of Wisconsin—Madison. She has published various articles on international finance and on the International Monetary Fund and is currently completing a book entitled Latin America and the U.S. Capital Markets, 1900-1980. 27 28 SAIS REVIEW the percentage ofprivate bank debt is an even higher—60 percent.2 Also, nearly all the Third World countries with payments problems are found in Latin America. Every major Latin American borrower except Colombia has recently renegotiated its debt or is in the process of doing so. A glance at the figures on debt service shows why: Eight Latin American countries have service payments that exceed their total export revenues.3 It is possible to be even more specific, however, since a small number of Latin American countries can be identified as the real focus of the problem. These countries include Mexico, Brazil, Argentina, and Chile. Together they account for 36 percent of total Third World debt and 45 percent of bank debt.4 An illustration of their importance is the recent estimate of William R. Cline that, if they failed to pay interest on their debts for a single year, the capital of the nine largest U.S. banks would be cut by one third, thus raising the cost of credit and exacerbating unemployment in the United States itself.5 It is therefore on these four countries that this article will focus. It will examine the composition of their debt in comparison with other Latin American and Third World countries and the ways in which they got into their current predicament. It will also look at the solutions being proposed and their likely effects. Finally, some policy recommendations will be suggested. A key theme will be that, contrary to the view many bankers seem to hold, the Latin American region is not homogenous. The four countries to be discussed include sharply different patterns of debt and economic policy. These differences must be taken into account in devising responses to the debt problems. One of the major difficulties in analyzing Third World debt is the lack of detailed data on an up-to-date basis. World Bank data are very useful for public sector medium- and long-term debt, but they have a one- to two-year lag. Furthermore, data on private sector debt and shortterm debt are generally not included. It is short-term debt that has provided the most volatile element in many of the renegotiations over the past year. The reason can be seen by comparing the World Bank figures on debt service ratios (interest plus amortization as a percentage of 2.Pedro-Pablo...

Rescheduling Sovereign Debt: Is There a Better Approach?

The World EconomyVolume 5, Issue 3 p. 279-290 Rescheduling Sovereign Debt: Is There a Better Approach? Jeffrey E. Garten, Jeffrey E. Garten JEFFREY E. GARTEN: Vice President, Lehman Brothers Kuhn Loeb Inc., investment bankers, New York, and Adjunct Professor of Political Economy, New York University; formerly Deputy Director of the Policy Planning Staff, United States Department of State, Washington, 1977–78.Search for more papers by this author Jeffrey E. Garten, Jeffrey E. Garten JEFFREY E. GARTEN: Vice President, Lehman Brothers Kuhn Loeb Inc., investment bankers, New York, and Adjunct Professor of Political Economy, New York University; formerly Deputy Director of the Policy Planning Staff, United States Department of State, Washington, 1977–78.Search for more papers by this author First published: November 1982 https://doi.org/10.1111/j.1467-9701.1982.tb00056.xCitations: 1 This article, based on a discussion paper prepared for the Council for Foreign Relations, New York, in May, reflects the author's personal views and should not be attributed to any institution with which he is affiliated. Reference is to non-oil exporting developing countries. Sources for statistics are World Economic Outlook (Washington: International Monetary Fund, 1982); World Debt Tables, 1981, World Bank, Washington; Development Cooperation, 1981 Review (Paris: Organisation for Economic Cooperation and Development, 1981); and World Financial Markets, Morgan Guaranty Trust Company, recent issues. Because of problems relating to comparable methodology, statistics for Eastern Europe are not included in the text, but the ‘Statistical Abstract of East-West Trade Finance’ (United States Department of Commerce, Washington, mimeograph, dated 25 June 1982) indicates a total hard-currency external debt for the Soviet Union and Eastern Europe (including Yugoslavia) of $108 billion as of 31 December 1981 (up from the total at the end of 1977 of $60 billion). These figures include medium-term and long-term debt held or guaranteed by governments as well as unguaranteed private debt. They do not include short-term debt — that is, debt which matures in less than twelve months. Morgan Guaranty has estimated that 31 per cent of all total external debt of the 21 largest developing-country borrowers is due in one year or less. One view of some of the shortcomings can be found in ‘A Nightmare of Debt’, The Economist, 20–26 March 1982. See also Chandra Hardy, Rescheduling Developing Country Debts 1956–1980: Lessons and Recommendations (Washington: Overseas Development Council, 1981). The ‘Group of Thirty’ has also been looking into the subject, its findings being reflected in Risks in International Lending (New York: Group of Thirty, 1982). The Paris Club has no formal rules and no legal status. Its meetings, not necessarily held in Paris, are chaired by the French Ministry of Finance and Economics. IMF officials often attend the meetings, along with representatives of the World Bank, the Organisation for Economic Cooperation and Development (OECD) and the United Nations Conference on Trade and Development (UNCTAD), as observers. Floating-rate notes are issued like bonds and are tradeable. But, as their name implies, interest is adjusted periodically to reflect prevailing rates. AboutPDF ToolsRequest permissionExport citationAdd to favoritesTrack citation ShareShare Give accessShare full text accessShare full-text accessPlease review our Terms and Conditions of Use and check box below to share full-text version of article.I have read and accept the Wiley Online Library Terms and Conditions of UseShareable LinkUse the link below to share a full-text version of this article with your friends and colleagues. Learn more.Copy URL Citing Literature Volume5, Issue3November 1982Pages 279-290 RelatedInformation

Reaganism and the future of the international payments system

When Ronald Reagan faced the delegates to the 1981 World Bank-IMF annual meetings in Washington and declared that, We who live in free market societies believe that growth, prosperity and ultimately human fulfilment, are created from the bottom up, not the government down. ' he was doing much more than simply repeating another of the sunny banalities for which his presidential discourses have been justly famed. Underneath was an ideological commitment to policy action, for whose strength of purpose many of the participants were not prepared. For, on top of the traditional American game of World Bank-bashing, came an unexpected attack on the nature and operations of the IMF. If, within the rather strange contours of current conservative thinking, the World Bank could be singled out forcriticism as an institution of international Keynesianism and an instrument for financing 'socialism' throughout the world, the same charges could hardly be levelled at the IMF, a monetarist institution much beloved of the international banks, not least the American ones. But the major shift of emphasis, from the 1980 meetings with their consensus on the need to expand international liquidity to cope with rising oil prices and the burden of Third World debt charges, to the 1981 meetings with their emphasis on restricting the volume and tightening the terms of access to multilateral sources of credit, is not the result of a passing whim of the incumbent American administration. On the contrary, it is fully consistent with the domestic policy programme and general world-view of the current ruling coalition in the United States. It is symptomatic of the collapse of the Keynesian consensus and the accompanying redistributive ethic, within the US and beyond. This significant shift in the prevailing currents of political opinion in the major capitalist countries will profoundly influence the future course of international monetary and financial affairs.

Debt Peonage: the Highest Form of Imperialism?

The swelling debt owed by Third World nations has begun to frighten some sectors of international finance capital. Their own press paints scenes rivaling latest horror movies from Hollywood. For example, British banking journal International Currency Review warns of world-wide financial catastrophe; In plain English, Third World faces a massive financing gap in 1981 (and beyond) which, if not met from official sources, must result in multiple defaults and a collapse of West's banking system. Spokespersons for biggest lending banks publish reassurances, arguing that such fears are…rooted in misconceptions about how existing system works, for giant banks are merely performing on a global scale what the bank branch on corner does…every day. This controversy within ranks of finance capitalism provides some unexpectedly candid revelations about Third World debt, showing how it has been moving steadily toward center of latest mode of imperialism.This article can also be found at Monthly Review website, where most recent articles are published in full.Click here to purchase a PDF version of this article at Monthly Review website.

The international organization of Third World debt

Third World debt grew very rapidly in the 1970s. Many states, faced with sharply higher costs for energy and manufactured imports, borrowed aggressively in unregulated offshore capital markets. But what constrains sovereign states to repay this debt to commercial banks? Creditors do not turn to their home states to enforce payment; rather, the supervision of sovereign debt is largely a function of commercial banking arrangements, especially lenders' syndicates, and the International Monetary Fund's conditional lending. This political structure, which involves unified private sanctions, has ensured that no state defaults unless it is insolvent or is willing to accept a radical rupture in its international commercial relationships. When the problem is insolvency, creditors routinely convene ad hoc conferences. In conjunction with an IMFapproved stabilization program, creditors can renegotiate debt-service schedules and provide new financing if necessary. These arrangements are distinctive among international economic regimes because they rely on nonstate actors as the primary source of rules, norms, and procedures.

Relief and reform in third world debt

This paper reviews the debt problem and argues that there is a need for wider financial reforms as well as debt relief. North-South dispute is best resolved through the development of agreed rules governing both debt relief and balance-of-payments financing for exogenously created shocks. The poorest countries require both debt relief and increased finance. Improved compensatory finance, more liberal supplementary finance and conditional repayment arrangements are recommended for all. The terms of new arrangements should be applied retroactively as debt relief. A new issue of special drawing rights is advocated for the financing of these relief and reform proposals.

ESTIMATING THE SHADOW PRICE OF FOREIGN EXCHANGE IN PROJECT APPRAISAL

The estimation of the shadow price of foreign exchange under the assumptions of optimal policies and continuing protection for project evaluation in developing countries is discussed. For any given policy alternative, the information requirements of alternative methods of project appraisal are identical. If the appropriate shadow exchange rate is used, alternative methods of project appraisal will give the same conclusion for accepting or rejecting a project. Under the assumption of optimal policies, there will be a need for using a shadow exchange rate to convert domestic values into world market prices. The use of this rate offers advantages over expressing the social opportunity cost of primary factors directly in world market prices. The shadow exchange rate has the advantage that it focuses on the balance of payments constraint of developing countries, and external factors such as world demand conditions, foreign aid, private investment, and debt servicing can easily be taken into account. Policy assumptions have implications for the prices of primary factors, the valuation of products that are not fully traded, and the origin of traded inputs.

Report of the Study Group on the Creation of Reserve Assets. Report to the Deputies of the Group of Ten, World Monetary Reform: Plans and Issues, Monetary Reform for the World Economy, International Payments, Debts, and Gold. Collected Essays, The World Economy at the Crossroads: A Survey of Current Problems of Money, Trade and Economic Development, Gold or Credit? The

Report of the Study Group on the Creation of Reserve Assets. Report to the Deputies of the Group of Ten, World Monetary Reform: Plans and Issues, Monetary Reform for the World Economy, International Payments, Debts, and Gold. Collected Essays, The World Economy at the Crossroads: A Survey of Current Problems of Money, Trade and Economic Development, Gold or Credit? The

Work of the Cornish Engineers

IN the form of a reprint from the Journal of the Royal Institution of Cornwall, there has been published at the Royal Printeries, Truro, a paper by W. Tregoning Hooper entitled “The World's Debt to Cornish Engineers”, one of the aims of which is to commemorate the historic experimental trials of the Austen's 80 in. Cornish pumping engine. At these trials, this engine established a record of accomplishment which demonstrated to men of science, engineers and economists the great potentialities of the power of steam, and the occasion is, therefore, a fitting one to be recalled and celebrated.

World debts and the economic conference

World debts and the economic conference

A Plea for Practical Co-operation and Understanding in the Settlement of World Debts

A Plea for Practical Co-operation and Understanding in the Settlement of World Debts

BOOK REVIEWS

Book reviewed in this article:Essentialia Philosophiae quae in usum incipientium digessit Franciscus P. Siegfried in Semjnario S. Caroli Borromaei Philadelphiense Professor.Franciscan Centenary Pamphlets.The Rofunpicism of St. Francis, and other Studies. By Father Cuthbert, O.S.F.C. 2nd Edition.The Mission of St. Augustine, and other Addresses. By Cardinal Gasquet, O.S.B.The Redemftorists. Ey George Stebbing, C.SS.R.The Inner Court: A Book of Private Prayer.God Within Us. By Raoul Plus, S. J. Done into English by Edith Cowell.Socjetas Christi. An Eight Days' Retreat. By Mother St. Paul. Preface by the Rev. Joseph Rickaby, S. J.Jesukin, and other Christmastide Poems. By Emily Hickey.Mostly Moonshine. By Madeleine Nightingale. With Woodcuts by C. T. Nightingale.The Logia in Ancient and Recent Literature. By John Donovan, S.J., M.A.A Catholic Schools' Hymn Book.The Babe's Book of Verse and Nursery Lays of Nursery Days. By M. Nightingale. Woodcuts by C. T. Nightingale.The World's Debt to the Catholic Church. By James J. Walsh, M.D., Ph.D., Se.D.The Golden Lion of Granpere. By Anthony Trollope. With Introduction by Hugh Wdpole.Number Two Joy Street.On the Unity of the Catholic Church. By St. Cyprian, Bishop of Carthage. Translated into English by O. R. Vassall‐Phillips, C. SS. R.Athos and its Monasteries. By the late F. W. Hasluck, M.A.Love Songs of Sion: A selection of devotional verse from old English sources, adapted by Nevile Watts.Manuale Theologiae Moralis, secundum principia S. Thomae Aquinatis, edidit Dominicus M. Priimmer, O.P.

The World's Debt to India

The World's Debt to India