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Western Hemisphere > Argentina

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Cover IMF Working Papers
Sovereign Debt
Mr. Leonardo Martinez, Mr. Francisco Roch, Francisco Roldán, and Mr. Jeromin Zettelmeyer
This paper surveys the literature on sovereign debt from the perspective of understanding how sovereign debt differs from privately issue debt, and why sovereign debt is deemed safe in some countries but risky in others. The answers relate to the unique power of the sovereign. One the one hand, a sovereign has the power to tax, making debt relatively safe; on the other, it also has control over its territory and most of its assets, making debt enforcement difficult. The paper discusses debt contracts and the sovereign debt market, sovereign debt restructurings, and the empirical and theoretical literatures on the costs and causes of defaults. It describes the adverse impact of sovereign default risk on the issuing countries and what explains this impact. The survey concludes with a discussion of policy options to reduce sovereign risk, including fiscal frameworks that act as commitment devices, state-contingent debt, and independent and credible monetary policy.
Keywords:
Sovereign Debt; Safe Debt; Debt Default; Debt Restructuring; Costs of Sovereign Default; Political Defaults; Fiscal Frameworks; State Contingent Debt; Original Sin; debt contract; short-term debt; market value; sovereign default; capital market exclusion; default decision; default event; payment terms; liquid asset; Securities markets; Fiscal rules; Global
Cover IMF Working Papers
On the Benefits of Repaying
Francesca G Caselli, Matilde Faralli, Paolo Manasse, and Ugo Panizza
This paper studies whether countries benefit from servicing their debts during times of widespread sovereign defaults. Colombia is typically regarded as the only large Latin American country that did not default in the 1980s. Using archival research and formal econometric estimates of Colombia's probability of default, we show that in the early 1980s Colombia's fundamentals were not significantly different from those of the Latin American countries that defaulted on their debts. We also document that the different path chosen by Colombia was due to the authorities' belief that maintaining a good reputation in the international capital market would have substantial long-term payoffs. We show that the case of Colombia is more complex than what it is commonly assumed. Although Colombia had to re-profile its debts, high-level political support from the US allowed Colombia do to so outside the standard framework of an IMF program. Our counterfactual analysis shows that in the short to medium run, Colombia benefitted from avoiding an explicit default. Specifically, we find that GDP growth in the 1980s was higher than that of a counterfactual in which Colombia behaved like its neighboring countries. We also test whether Colombia's behavior in the 1980s led to long-term reputational benefits. Using an event study based on a large sudden stop, we find no evidence for such long-lasting reputational gains.
Keywords:
Sovereign Debt; Default; Reputation; probability of default; Colombia's behavior; Colombia's probability; default probability; adjustment program; market access; International capital markets; Debt default; Caribbean; Global
Cover Regional Economic Outlook, October 2020, Western Hemisphere
Regional Economic Outlook, October 2020, Western Hemisphere
Pandemic Persistence Clouds the Recovery
International Monetary Fund. Western Hemisphere Dept.

Abstract

The pandemic continues to spread in Latin America and the Caribbean (LAC), but economic activity is picking up. After a deep contraction in April, activity started recovering in May, as lockdowns were gradually eased, consumers and firms adapted to social distancing, some countries introduced sizable policy support, and global activity strengthened.

Keywords:
pandemic; lockdowns; recovery; reopening; public health; REO; IMF staff calculation; nominal GDP; trading partner; world bank LAC estimate; hard currency; potential GDP; banking sector; fiscal policy; COVID-19; Debt restructuring; Securities markets; Caribbean; Global; Central America
Cover Global Financial Stability Report, October 2018
Global Financial Stability Report, October 2018
A Decade after the Global Financial Crisis: Are We Safer?
International Monetary Fund. Monetary and Capital Markets Department

Abstract

In the 10 years since the global financial crisis, regulatory frameworks have been enhanced and the banking system has become stronger, but new vulnerabilities have emerged, and the resilience of the global financial system has yet to be tested.

Keywords:
GFSR; financial condition; market liquidity; emerging market economy; IMF executive board discussion summary; risk; a number of emerging market economies; debt vulnerability; foreign exchange; inflation surprise; Emerging and frontier financial markets; Financial sector stability; Global financial crisis of 2008-2009; Financial Sector Assessment Program; Bank resolution framework; Global; Asia and Pacific; Africa; Middle East; financial system; commercial paper; FSAP risk analysis finding; volatility Index; U.S. dollar; international community; Systemic risk; Caribbean
Cover IMF Staff Country Reports
European Union: Publication of Financial Sector Assessment Program Documentation—Technical Note on European Securities and Markets Authority
International Monetary Fund. Monetary and Capital Markets Department
This article reviews the European Securities and Markets Authority (ESMA) of the European Union. ESMA performed a role in the regulation and supervision of the securities market. ESMA was created to supervise the financial system to enhance financial markets. In crisis management, ESMA focused on coordination, and identified and monitored risks. It also played an important role in the single rule book credit rating agency supervision. The assessment of the ESMA in the European Union is a next level in economic development.
Keywords:
ISCR; CR; ESMA staff; ESMA regulation; ESMA official; ESMA chair; governance structure; simulation exercise; Securities markets; Financial sector stability; Budget planning and preparation; Crisis management; Europe; Global
Cover IMF Staff Country Reports
Argentina: Detailed Assessment of Observance of IOSCO Objectives and Principles of Securities Regulation
International Monetary Fund
This assessment finds that Argentina has made significant progress to improve its securities regulatory system within the existing legal framework. This assessment finds areas that need to be improved. The reinforcement of supervision powers in accordance to international standards represents an immediate task. The assessment included a review of the main securities laws, executive decrees, and general and trading of securities. The government acknowledges that important challenges remain, and the assessments were noteworthy to identify many of them.
Keywords:
ISCR; CR; capital market; The CNV; insider trading; continuous market; mutual fund; short term; securities law; public offering; commercial paper; job creation; internal audit; CNV rule; auction market; trading system; Securities; Securities regulation; Mutual funds; Securities markets; Futures markets; Global
Cover IMF Working Papers
Sovereign Default Risk and Private Sector Access to Capital in Emerging Markets
Mr. Udaibir S Das, Mr. Michael G. Papaioannou, and Christoph Trebesch
Top down spillovers of sovereign default risk can have serious consequences for the private sector in emerging markets. This paper analyzes the effects of these spillovers using firm-level data from 31 emerging market economies. We assess how sovereign risk affects corporate access to international capital markets, in the form of external credit (loans and bond issuances) and equity issuances. The study first analyzes the impact of sovereign debt crises during the 1980s and 1990s. It goes on to examine the 1993 to 2007 period, using additional measures of sovereign risk-sovereign bond spreads and sovereign ratings-as explanatory variables. Overall, we find that sovereign default risk is a crucial determinant of private sector access to capital, be it external debt or equity. We also find that crisis resolution patterns matter and that defaults towards private creditors have stronger adverse consequences than defaults to official creditors.
Keywords:
WP; debt crisis; debt-crisis characteristic; crisis-resolution procedure; financial market; Sovereign default; Private sector access; Capital flows; Emerging Markets; debt-crisis episode; debt-crisis dummy; distress episode; crisis characteristic; debt-restructuring negotiations; debt-crisis period; debt issuance; bond debt; debt-restructuring agreement; debt flow; sovereign debt issuance; Emerging and frontier financial markets; Capital markets; Stocks; Global
Cover IMF Working Papers
Are Financial Crises Alike?
Chrismin Tang, Mr. Mardi Dungey, Mr. Vance Martin, Ms. Brenda Gonzalez-Hermosillo, and Ms. Renee Fry
This paper investigates whether financial crises are alike by considering whether a single modeling framework can fit multiple distinct crises in which contagion effects link markets across national borders and asset classes. The crises considered are Russia and LTCM in the second half of 1998, Brazil in early 1999, dot-com in 2000, Argentina in 2001-2005, and the recent U.S. subprime mortgage and credit crisis in 2007. Using daily stock and bond returns on emerging and developed markets from 1998 to 2007, the empirical results show that financial crises are indeed alike, as all linkages are statistically important across all crises. However, the strength of these linkages does vary across crises. Contagion channels are widespread during the Russian/LTCM crisis, are less important during subsequent crises until the subprime crisis, where again the transmission of contagion becomes rampant.
Keywords:
WP; subprime crisis; Financial crises; Contagion; Factor models; contagion channel; LTCM crisis; crisis model; crisis period; dot-com crisis; pressure approach; Securities markets; Stock markets; Bonds; Stocks; Global; South America