A Soft Law Mechanism for Sovereign Debt Restructuring Based on the UN Principles

The ultimate goal of sovereign debt restructuring is to restore the sustainability of public debt with high probability. But this is not happening. Since 1970, more than half of the restructuring episodes with private creditors were followed by another restructuring or default within five years — evidence inconsistent with any sensible definition of »restoration of sustainability of public debt with a high probability.« This evidence suggests that relief for distressed debtors is often insufficient for achieving the main goal of a restructuring, delaying the recovery from recessions or depressions, with large negative social consequences. The United Nations General Assembly approved in September 2015 nine principles that should guide sovereign debt restructuring processes. The UN has laid out steps in the right direction. Although in the short term the creation of a multinational statutory framework for debt crises resolution does not seem to be feasible, the UN principles provide a valuable basis for the next stages of the process. This article analyzes the usefulness of those principles. Section 2 discusses how the principles could help in improving the resolution of sovereign debt crises. Section 3 explores a possible way forward along the lines of an incremental approach

Creating a Framework for Sovereign Debt Restructuring that Works

Recent controversies surrounding sovereign debt restructurings show the weaknesses of the current market-based system in achieving efficient and fair solutions to sovereign debt crises. This article reviews the existing problems and proposes solutions. It argues that improvements in the language of contracts, although beneficial, cannot provide a comprehensive, efficient, and equitable solution to the problems faced in restructurings–but there are improvements within the contractual approach that should be implemented. Ultimately, the contractual approach must be complemented by a multinational legal framework that facilitates restructurings based on principles of efficiency and equity. Given the current geopolitical constraints, in the short-run we advocate the implementation of a “soft law” approach, built on the recognition of the limitations of the private contractual approach and on a set of principles – most importantly, the restoration of sovereign immunity – over which there may be consensus. We suggest that in a context of political economy tensions it should be impossible for a government to sign away the sovereign immunity either for itself or successor governments. The framework could be implemented through the United Nations, or it could prompt the creation of a new institution

The Education System in Mexico

Over the last three decades, a significant amount of research has sought to relate educational institutions, policies, practices and reforms to social structures and agencies. A number of models have been developed that have become the basis for attempting to understand the complex relation between education and society. At the same time, national and international bodies tasked with improving educational performances seem to be writing in a void, in that there is no rigorous theory guiding their work, and their documents exhibit few references to groups, institutions and forces that can impede or promote their programmes and projects. As a result, the recommendations these bodies provide to their clients display little to no comprehension of how and under what conditions the recommendations can be put into effect. The Education System in Mexico directly addresses this problem. By combining abstract insights with the practicalities of educational reforms, policies, practices and their social antecedents, it offers a long overdue reflection of the history, effects and significance of the Mexican educational system, as well as presenting a more cogent understanding of the relationship between educational institutions and social forces in Mexico and around the world

An Analysis of Puerto Rico’s Debt Relief Needs to Restore Debt Sustainability

Puerto Rico’s economy has been suffering a recession for more than a decade. The recession has led to a debt and economic crisis. The lack of opportunities has resulted in migration outflows that affect the lives of thousands of families and leave a higher burden on those who stay. Overall, the current macroeconomic dynamics is destabilizing the lives of nearly 3.5 million U.S. citizens in Puerto Rico. Reversing this dynamic requires appropriate macroeconomic and debt policies. The collapse of economic activity has made the full payment of public debt unfeasible. Our study’s main goal is to offer insights for designing a plan of action for resolving Puerto Rico’s current debt crisis. The design of a restructuring proposal must note that the relationship between debt restructuring and fiscal policies exhibits bi-directional causality. On one hand, absent macroeconomic policies that expand the aggregate demand, Puerto Rico will not recover; and if the economy does not recover, Puerto Rico will not be able to pay its creditors without imposing severe damages on its nearly 3.5 million residents. On the opposite direction of causality, a larger debt reduction would imply that the territory would have more resources for expansionary macroeconomic policies, making the recovery more feasible and full repayment of the restructured debt more likely. Our contribution is thus twofold. First, we examine the macroeconomic implications of Puerto Rico’s Fiscal Plan that has been approved for fiscal years 2017-18 to 2026-27, as it is a crucial element for a computation of Puerto Rico’s debt restructuring needs. Second, we perform a Debt Sustainability Analysis (DSA) that incorporates the expected macroeconomic dynamics implied by the Fiscal Plan in order to compute Puerto Rico’s restructuring needs

Introduction

This is an introduction to "Too Little, Too Late: The Quest to Resolve Sovereign Debt Crisis". Sovereign debt crises are becoming, once again, frequent. In some cases, the costs to the citizens of those countries facing such crises have been enormous. Deficiencies in the mechanisms for resolving such crises cast a pallor over countries that are not yet in a crisis but worry that they might become so; and indeed, the high costs and uncertainties associated with debt restructuring dampen cross-border capital flows and force especially developing countries and emerging markets to pay higher interest rates than might be the case if there were better ways of resolving these debt problems.There have been several important academic studies addressing various aspects of frameworks for sovereign debt restructuring and the advantages and disadvantages of these mechanisms relative to the private contractual approach. In light of the recent events and progress in our understanding of the issues, these studies need to be updated. This book fills in this gap by providing a collection of essays from top academic economists, lawyers, and practitioners in the field, providing guidance on the most critical questions. (Many of these ideas were presented as part of an ongoing series of conferences held at Columbia University on frameworks for sovereign debt restructuring.

Análisis del alivio de deuda necesario para restaurar la sostenibilidad de la deuda de Puerto Rico

La economía de puerto rico ha estado en recesión durante más de una década. Esta recesión ha producido una crisis de deuda y económica en Lgeneral. La falta de oportunidades ha redundado en flujos migratorios que afectan la vida de miles de familias y hacen la carga más pesada para los que se quedan. En general, la dinámica macroeconómica actual está desestabilizando la vida de unos 3.5 millones de ciudadanos estadounidenses en Puerto Rico. Contrarrestar esta dinámica requiere políticas adecuadas, tanto macroeconómicas como para el manejo de la deuda.El colapso de la actividad económica ha hecho inviable el pago completo de la deuda pública. La meta principal de nuestro estudio es ofrecer una perspectiva para desarrollar un plan de acción con vistas a resolver la actual crisis de la deuda de Puerto Rico. El diseño de una propuesta de reestructuración debe tener en cuenta que la relación entre la reestructuración de la deuda y las políticas fiscales implica una causalidad bidireccional. Por un lado, sin políticas macroeconómicas que expandan la demanda agregada, Puerto Rico no se recuperará, y si la economía no se recupera, Puerto Rico no podrá pagar a sus acreedores sin imponer daños graves a sus casi 3.5 millones de residentes. En la dirección causal opuesta, una mayor reducción de la deuda implicaría que el territorio contaría con más recursos para políticas macroeconómicas expansivas, con lo cual se haría más viable la recuperación y más probable el pago completo de la deuda reestructurada.Nuestro estudio realiza principalmente dos contribuciones. En primer lugar, examinamos las implicaciones macroeconómicas del Plan Fiscal de Puerto Rico que ha sido aprobado para los años fiscales desde 2017-18 hasta 2026-27, ya que es un elemento crucial en el cómputo de las necesidades de reestructuración de la deuda de Puerto Rico. En segundo lugar, presentamos un Análisis de Sostenibilidad de la Deuda (ASD) donde se incorpora la dinámica macroeconómica esperada que implicaría la implementación del Plan Fiscal a fin de computar las necesidades de reestructuración de Puerto Rico.Fil: Gluzmann, Pablo Alfredo. Consejo Nacional de Investigaciones Científicas y Técnicas; Argentina. Universidad Nacional de La Plata. Facultad de Ciencias Económicas. Departamento de Ciencias Económicas. Centro de Estudios Distributivos Laborales y Sociales; ArgentinaFil: Guzman, Martin Maximiliano. Columbia University; Estados Unidos. Universidad de Buenos Aires; Argentina. Consejo Nacional de Investigaciones Científicas y Técnicas; ArgentinaFil: Stiglitz, Joseph E.. Columbia University; Estados Unido

Identifying and Resolving Inter-creditor and Debtor-creditor Equity Issues in Sovereign Debt Restructuring

Most discussions of inter-creditor issues vis-à-vis sovereign debt restructuring focus on the collective action problems that lead to individually and collectively suboptimal outcomes. Some studies also highlight, or at least imply, that creditor interests are often relatively aligned with debtor interests, insofar as both groups want to avoid crises and, when they occur, resolve them with minimal disruption. This, of course, is not always the case, in particular when creditor groups are non-homogenous. In many cases, significant conflicts of interest exist and can undermine inter-creditor, as well as debtor-creditor, equity and cooperation during debt restructurings. This policy brief draws on a joint workshop with Columbia University on Frameworks for Sovereign Debt Restructuring, held in New York on November 17, 2014. It narrows in on a specific set of salient issues that affect debt restructuring processes and outcomes: those related to inter-creditor and creditor-debtor equity. It also offers a few policy considerations for beginning to resolve these issues in ways that contribute to fairer and more effective debt restructurings

A Theory of Pseudo-Wealth

Recent events in the US and Europe have witnessed the limitations of conventional macroeconomic models to predict and explain large economic recessions and crises, and to provide guidance for policies that attempt to resolve them

Real exchange rate policies for economic development

This paper analyzes the role of real exchange rate (RER) policies in promoting economic development. Markets provide a suboptimal amount of investment in sectors characterized by learning spillovers. We show that a stable and competitive RER policy may correct for this externality and other related market failures. The resulting development of these sectors leads to overall faster economic growth. A system of effectively multiple exchange rates is required when spillovers across different tradable sectors differ. The impact of RER policies is increased when they are complemented by traditional industrial policies that increase the elasticity of the aggregate supply to the RER. Among the instruments required to implement a stable and competitive RER are interventions in the foreign exchange market and regulation of capital flows. We also discuss the trade-offs associated with alternative stable and competitive RER policies and the relationship between the use of exchange rate policies for macro-stability and for development

Modelling Future Coronary Heart Disease Mortality to 2030 in the British Isles.

OBJECTIVE: Despite rapid declines over the last two decades, coronary heart disease (CHD) mortality rates in the British Isles are still amongst the highest in Europe. This study uses a modelling approach to compare the potential impact of future risk factor scenarios relating to smoking and physical activity levels, dietary salt and saturated fat intakes on future CHD mortality in three countries: Northern Ireland (NI), Republic of Ireland (RoI) and Scotland. METHODS: CHD mortality models previously developed and validated in each country were extended to predict potential reductions in CHD mortality from 2010 (baseline year) to 2030. Risk factor trends data from recent surveys at baseline were used to model alternative future risk factor scenarios: Absolute decreases in (i) smoking prevalence and (ii) physical inactivity rates of up to 15% by 2030; relative decreases in (iii) dietary salt intake of up to 30% by 2030 and (iv) dietary saturated fat of up to 6% by 2030. Probabilistic sensitivity analyses were then conducted. RESULTS: Projected populations in 2030 were 1.3, 3.4 and 3.9 million in NI, RoI and Scotland respectively (adults aged 25-84). In 2030: assuming recent declining mortality trends continue: 15% absolute reductions in smoking could decrease CHD deaths by 5.8-7.2%. 15% absolute reductions in physical inactivity levels could decrease CHD deaths by 3.1-3.6%. Relative reductions in salt intake of 30% could decrease CHD deaths by 5.2-5.6% and a 6% reduction in saturated fat intake might decrease CHD deaths by some 7.8-9.0%. These projections remained stable under a wide range of sensitivity analyses. CONCLUSIONS: Feasible reductions in four cardiovascular risk factors (already achieved elsewhere) could substantially reduce future coronary deaths. More aggressive polices are therefore needed in the British Isles to control tobacco, promote healthy food and increase physical activity