Creditworthiness(2)

1、The Way to Paradise? Emerging Debt Markets at the Beginning of the XXIth CenturyBanque de FranceParis May 29-June 2 2006Javier SantisoChief Development Economist & Deputy DirectorOECD Development Centre1A historical perspectiveSome recent improvements in emerging debt markets2Post-Argentina Trauma:

2、A Policy Proposal3Fasten your seatbelts: Serial defaulters and crisis in emerging marketsSource: OECD Development Centre, 2006.Based on: M. Bordo and B. Eichengreen. “Crises Now and Then: What Lessons from the Last Era of Financial Globalization”, 2002. and N. Roubini and B. Setser. “Bail-outs or Ba

3、il-ins? Responding to Financial Crises in Emerging Economies”, 2005.Note: Recent crisis episodes on the period 1997-2006 include Brazil (1998, 2002), Ecuador (1998), Pakistan (1998), Ukraine (1998), Turkey (2000), Argentina (2001) and Uruguay (2001).Average Emerging marketsAverage Industrial countri

4、esSerial defaults and crises are not a privilege of todays emerging markets Serial Defaults by Country (1500-2006)Source: OECD Development Centre, 2006.Based on: Reinhart, C., Rogoff, K., and M. Sevastano. “Debt Intolerance”. NBER Working Paper 9908, 2003. Volumes of traded emerging markets debt are

5、 not as stunning Source: OECD Development Centre, 2006.Based on: Mauro, P., Sussman, N. and Y. Yafeh. “Emerging Markets and Financial Globalization”, 2002, 2006 and Bank of International Settlements, 2006.Currently, financial integration is not at its highest levelSource: OECD Development Centre, 20

6、06.Based on Schularick 2006 and GDP figures from Maddison (1995, 2001), Woodruff (1966) and Wilkins (1989) for 1913/14.Average 1913 Average 2000 Note: Financial Integration Index calculated as the ratio between the share of international investments and the share of world GDP. International Financia

7、l Integration IndexCountries have made considerable progress to keep indebtedness at sustainable levels Source: OECD Development Centre, 2006.Based on: Dany Jaimovich and Ugo Panizza. “Public Debt around the World: A New Dataset of Central Government Debt”. Inter-American Development Bank. March 200

8、6.Total External Debt over GDP but more efforts are needed to reduce well-known vulnerabilities Source: OECD Development Centre, 2006.Based on: Dany Jaimovich and Ugo Panizza. “Public Debt around the World: A New Dataset of Central Government Debt”. Inter-American Development Bank. March 2006.Total

9、External Debt over GDPSource: OECD Development Centre, 2006Based on: International Financial Statistics, IMFTotal External Sovereign Debt (% of GDP)Other emerging markets made improvements, becoming less dependent on external sourcesExternal and domestic debt (Latin America)External and domestic deb

10、t (World)However, the failure to boost internal savings rates is persistent in Latin America.Source: OECD Development Centre, 2006.Based on Global Development Finance, The World Bank, 2005. FIAP, 2005.Pension Assets under managementEvolution of Regional Saving Rates making the region still dependent

11、 on foreign capitalRegional averageSource: OECD Development Centre, 2006.Based on Global Development Finance, The World Bank, 2005.Net National savings by country (1996-2005)1A historical perspectiveSome recent improvements in emerging debt markets2Post-Argentina Trauma: A Policy Proposal3 Endogenou

12、s insurance mechanisms have been developed in recent yearsSource: OECD Development Centre, 2006.Based on: International Financial Statistics, IMF and Central Banks information.Foreign Exchange Reserves by Region2.1. These mechanisms continue to consolidate even after recent repayments 20%30%40%50%60

13、%70%80%90%Pre-RepaymentPost-RepaymentPre-RepaymentPost-RepaymentArgentinaBrazil(International Reserves in % of Public Sector Borrowing Requirements +Monetary Base)International Reserves-40%5%10%15%20%25%30%35%-35%8,00013,00018,00023,00028,000Oct-02Dec-02Feb-03Apr-03Jul-03Sep-03Nov-03Feb-04Apr-04Jun-

14、04Aug-04Nov-04Jan-05Mar-05Jun-05Aug-05Oct-05Jan-06Mar-0628,07821,769Pre-IMF RepaymentPost-IMF Repayment35000400004500050000550006000065000Oct-02Dec-02Feb-03Apr-03Jul-03Sep-03Nov-03Feb-04Apr-04Jun-04Aug-04Nov-04Jan-05Mar-05Jun-05Aug-05Oct-05Jan-06Mar-0667,93560,090Pre-IMF RepaymentPost-IMF RepaymentL

15、iquidity RatioRepayment:9.5 bnRepayment:15.6 bn2.1.Source: OECD Development Centre, 2006 and Intern. Financial Statistics, IMF, 2006 New instruments have been increasingly used for sovereign bonds issuanceEmerging Markets Sovereign Bonds IssuanceSource: OECD Development Centre, 2006.Based on: Global

16、 Financial Stability Report, IMF 2006, Dealogic and Turgano and Santiso, 2005.2.2Billions of US dollarsNumber of issues Despite the slackening in recent years, corporate issuers are increasingly importantInternational Debt Securities by Nationality of Issuer Corporate Issuers Amounts outstandingSour

17、ce: OECD Development Centre, 2006.Based on Bank of International Settlements, 2006.2.2. Latin American governments have increased the size of their domestic bond markets Domestic Debt SecuritiesAll Issuers Amounts outstanding2.3. Source: OECD Development Centre, 2006.Based on Bank of International S

18、ettlements, 2006. Domestic debt markets are comparatively shallow and there is room for further expansionSize of Local Debt Securities Markets(amounts outstanding) Source: OECD Development Centre, 2006.Based on: Bank of International Settlements and IMF.Average Total LAC2.3.Source: OECD Development

19、Centre, 2006.Based on Bank of International Settlements, 2006 and JP Morgan Emerging-Market Bond Index (April 2006).International Bonds and Notes by CurrencyAmounts outstanding2.3. Total Return in Emerging Market Bond Indexes Issuance of local-currency bonds is on the rise, outperforming US dollar b

20、ondsBillions of US dollars Changes in debt composition, maturities, and rate structure have been observedAsiaLACSource: OECD Development Centre, 2006.Based on: Global Financial Stability Report, IMF, 2006.2.3.The original sin was a persistent phenomenon in Latin American countriesSource: OECD Develo

21、pment Centre, 2006.Based on: Eichengreen, B. Hausmann, R. and U. Panizza. “Currency Mistmatches, Debt Intolerance and Original Sin. Why they are not the same and why it matters”, NBER Working Paper 10036, 2003.Note: Original Sin Index is defined as:The inability of countries to borrow in their own c

22、urrency2.4.Original Sin Index Original sin has been overcome through the promotion of domestic financial marketsSource: OECD Development Centre, 2006.Based on: Mehl, A. and J. Reynaud. “The Determinants of Domestic Original Sin”. European Central Bank Working Paper No. 560, Dec. 2005.2.4.Original Si

23、n Index% of GDP Credit worthiness and higher access to capital can be reached through remittancesSource: OECD Development Centre, 2006.Based on: “Economic Implications of Remittances and Migration”. World Bank, 2006.2.5.(2004)which could have a positive effect on sovereign credit ratings2.5.Source:

24、OECD Development Centre, 2006.Based on: Rowland, P. “Determinants of Spread, Credit Ratings and Creditworthiness for Emerging Market Sovereign Debt: A Follow-Up Study Using Pooled Data Analysis”. Banco de la Republica de Colombia, 2005.Determinants of Sovereign Credit RatingsPotential Improvements i

25、n Credit Rating through RemittancesRating (S&P)1A historical perspectiveSome recent improvements in emerging debt markets2Post-Argentina Trauma: A Policy Proposal3Considerable efforts for monitoring portfolio flows could have been sparedIn 2000 no systematic databases of portfolio investments were a

26、vailableOne year spent with a research team of 3 economists to collect microeconomic dataThree hundred interviews conducted with asset managers, buy- side and sell-side strategists Source: Palgrave, 2003.The political economy of emerging markets: actors, institutions and crisesSource: Javier Santiso

27、, “The political economy of emerging markets: actors, institutions and financial crises in Latin America”. New York, Palgrave, 2003.Since 2000 new databases have been developed with higher update frequencySources: EPFR, Bloomberg, and Santander Investment. Source: OECD Development Center, 2006.Based

28、 on: /Back to the Argentinean Debt Default: CIPS+ as a strategic tool?The Argentinean giant debt default has been epic in scale. It involved 152 varieties of paper denominated in six currencies and governed by eight jurisdictions.010203040199920002001Source: Nieto and Santiso (2006).ArgentinaBrazilM

29、exicoVenezuela Number of sovereign bonds issued before the Argentinean crisisRecent Sovereign Debt Restructurings2005200019991998-20001998-20002003Number of jurisdictionsNumber of sovereign bondsBack to the Argentinean Debt Default: CIPS+ as a strategic tool?Argentina defaulted on bonds worth $81 bi

30、llion in December 2001.It represented the longest period of debt restructuring : no database of Argentinean bondholders is available (Lazard was hired for this purpose).Source: OECD Development Centre, 2006.Based on Porzecanski, A. “From Rogue Creditors to Rogue Debtors: Implications of Argentinas D

31、efault”, 2005.Recent Sovereign Debt Restructurings2005200019991998-20001998-20002003Thank you for your attention!ANNEX:Three essential challenges for Latin AmericaThree essential challenges for Latin American economies :High indebtedness and vulnerabilitiesStrong dependence on foreign capitalLow rat

32、es of savings and illiquidity123Source: OECD Development Centre, 2006Based on IMF, World Bank, National Data Debt ratios have decreased, but they remain high with respect to other economiesAverage1. Average External debt as a share of exports (1996-2005)Latin American public sector still has important obligationsSource: OECD Development Centre, 2006.Based on: International Financial Statistics, IMF and Central Banks information.Public Sector Borrowing requirementsPSBR measure the financing needs of public, private and social entities that act on the Governments behalf. 1. Three