Innovative Financing Instruments in Latin America and the Caribbean Editors: Pérez Caldentey Esteban, Villarreal Francisco G

In the aftermath of the global financial crisis (2008–2009), the external financing needs of Latin America and the Caribbean increased significantly, reflecting a process of external debt accumulation in all developing regions, exacerbated by the impacts of COVID-19. The region is now the most indebted in the developing world, with a debt profile that makes it highly vulnerable to changes in international lending conditions and to perceptions of risk. This has placed a major constraint on government responses to the COVID-19 emergency and undermines their capacity to build forward better.

This document considers two proposals to address these challenges:
(i) expand and redistribute liquidity from developed to developing countries through innovative uses of SDRs; and
(ii) expand the set of innovative instruments to increase debt repayment capacity and avoid over-indebtedness.

 

Content:

Summary
Introduction
I. Special Drawing Rights: advantages, limitations, and innovative uses
Esteban Pérez Caldentey, Francisco G. Villarreal and Nicolás Cerón Moscoso
II. State-contingent debt instruments as insurance against future sovereign debtcrises in Latin American
Leonardo Vera Azaf
III. Income-linked bonds
Fausto HernándezIV. Hurricane clauses in debt contracts in the context of unsustainable debt in Barbados and Grenada
Dave Seerattan.
V. Sustainable finance
Esteban Pérez Caldentey
VI. A multilateral credit rating agency
Susan K. Schroeder.

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