Development financing during a crisis : securitization of future receivables

Mexico's Telmex undertook the first future-flow securitization transaction in 1987. From then through 1999, the principal credit rating agencies rated more than 200 transactions totaling $47.3 billion. Studying several sources, the authors draw conclusions about the rationale for using this asset class, the size of its unrealized potential, and the main constraints on its growth. Typically the borrowing entity (the originator) sells its future product (receivable) directly or indirectly to an offshore special purpose vehicle (SPV), which issues the debt instrument. Designated international customers make their payments for the exports directly to an offshore collection account managed by a trustee. The collection agent makes principal and interest payments to investors and pays the rest to the originator. This transaction structure allows many investment-grade borrowers in developing countries to pierce the sovereign credit ceiling and get longer-term financing at significantly lower interest costs. The investment-grade rating attracts a wider group of investors. And establishing a credit history for the borrower makes it easier for it to access capital markets later, at lower costs. This asset class is attractive forinvestors-especially buy-and-hold investors, such as insurance companies-because of its good credit rating and stellar performance in good and bad times. Defaults in this asset class are rare, despite frequent liquidity crises in developing countries. Latin American issuers (Argentina, Brazil, Mexico, and Venezuela) dominate this market. Nearly half the dollar amounts raised are backed by receivables on oil and gas. Recent transactions have involved receivables on credit cards, telephones, workers'remittances, taxes, and exports. The potential for securing future receivables is several times the current level ($10 billion annually). The greatest potential lies outside Latin America, in Eastern Europe and Central Asia (fuel and mineral exports), the Middle East (oil), and South Asia (remittances, credit card vouchers, and telephone receivables). One constraint on growth is the paucity of good collateral in developing countries. Crude oil may be better collateral than refined petroleum. Agricultural commodities are harder to securitize. Another constraint: the dearth of high-quality issuers in developing countries. Securitization deals are complex, with high preparation costs and long lead times. The ideal candidates are investment-grade entities (in terms of local currency) in sub-investment-grade countries (in terms of foreign currency). Establishing indigenous rating agencies can slash out-of-pocket costs. Developing standardized templates for certain types of securitizations might help. A master trust arrangement can reduce constraints on size. Multilateral institutions might consider providing seed money and technical assistance for contingent private credit facilities.Financial Intermediation,Payment Systems&Infrastructure,International Terrorism&Counterterrorism,Banks&Banking Reform,Environmental Economics&Policies,Financial Intermediation,Banks&Banking Reform,Housing Finance,Environmental Economics&Policies,Economic Theory&Research

Securitization of Future Remittance Flows: A Global Overview

Remittances, Financial Services

Socio-Demographic Dynamics and Household Demand

This paper investigates the impact of changes in socioeconomic, demographic, and geographic characteristics of households on their expenditure pattern in the United States. Using Consumer Expenditure Survey dat a, it is found that the major item of expenditure, i.e., owner-occupied housing, depends only on household income. The price variables like education of the household, and taste variables like race, are observed to influence expenditures on more items than other observed characteristics of age, size, and region of location. Female employment increases expenditures on time-saving products like restaurant meals and child care at the expense of time-using items.

Economics of Education in Sierra Leone

This paper presents a critical evaluation of Sierra Leone's educational system. From benefit-cost analysis, the social profitability of investment in primary and secondary schools is estimated to exceed that in higher education. The manpower requirement and supply projections indicate that the largest shortage is also likely to occur at the middle level. Hence it is concluded that Sierra Leone should place greater emphasis on primary and secondary education. One way of obtaining resources for this is to let the university students bear a larger proportion of total costs. It is argued that such a policy will introduce an element of equity in educational financing.Center for Research on Economic Development, University of Michiganhttp://deepblue.lib.umich.edu/bitstream/2027.42/100812/1/ECON271.pd

A computer controlled, narrow linewidth, broadly tunable, continuous wave laser

A continuous wave, tunable, single frequency dye ring laser has been developed. This laser is capable of giving output powers, in a single longitudinal mode, in excess of 7 mV, using different dyes and Second Harmonic Generation or Sum Frequency Mixing schemes, a wavelength coverage from 26 nm to 8 nm can be achieved. Using a PDP 11/3 minicomputer and a CAMAC dataway, control of a linear as well as a ring laser, oscillating in a single longitudinal mode, has been accomplished. The various optical elements in the dye laser cavity and the nonlinear mixing device are synchronously tracked. The laser can be operated both as a low resolution (4 GHz bandwidth) and a high resolution (.1 GHz bandwidth) visible and ultraviolet radiation source. Using Boyd and Kleinman theory for Second Harmonic Generation of focussed Gaussian beams,theoretical estimates for the wavelength and angle bandwidths are made. Some of the results have been experimentally verified

DETERMINANTS OF CAPITAL FLIGHT FROM ARGENTINA, BRAZIL, AND MEXICO

This paper derives four alternative measures of "hot money" outflows of capital from Latin America's three major debtors-Argentina, Brazil, and Mexico. These measures are based on two sources of quarterly data from 1977 to 1986: (i) the balance of payments statistics and (ii) changes in the U.S. bank deposits of non-banking entities in the debtor countries. The portfolio adjustment model then is used to specify the factors influencing capital flight. These factors are grouped into two types. The push factors relate to characteristics of the so-called source countries for capital flight and include the interest and inflation rates, the degree of currency overvaluation, and the environmental risks embodied in both frequent regime changes and the onset of the 1982 debt crisis. The pull factors include the interest and inflation rates in the host country, the United States. The principal findings of the paper show that the push factors alone are significant in explaining capital outflows from Argentina and Brazil. For Mexico, by contrast, the push factors as well as the pull factors are found to be relevant in explaining the behavior of flight capital, as measured by changes in the deposits of Mexican non-bank entities in the U.S. banking system. Copyright 1989 Western Economic Association International.