27/2/211 Joint World Bank CEMLA Workshop Debt Management Performance Assessment Tool (DeMPA) Overview of Debt Management in LAC Mexico City, Mexico February 28th March 4th, 211 Jaime Coronado Coordinator Public Debt Program, Payment Systems and Credit Reporting Program Presentation Content Crisis in Latin America and the Caribbean (LAC) Main impacts Policy responses Results Comparison with countries outside the Region Region perspectives Some characteristics of LAC debt DeMPA results in the region Conclusions 1
27/2/211 Crisis in Latin America and the Caribbean (LAC) Main Impacts The crisis was mainly reflected in GDP growth and Fiscal Balance. 1 8 6 4 2-2 -4 LAC: GDP Growth & Urban Unemployment (Annual percentage change) 8.6 5.8 7.9 58 5.8 7.3 4.2 8.2 26 27 28 29-1.9 GDP Growth Unemployment 1.8.6 4.4.2 -.2 -.4.8 LAC: BoP Current Account.2 -.3 26 27 28 29 Fuente: CEPAL Elaboración: Programa de Deuda Pública CA -.2 LAC: Central Government Fiscal Balance 2. 1.. -1. 26 27 28 29-1.3-1.1 -.8-2. -3. -4. -4. -5. Source: WEO Oct. 21 Fiscal Balance 9. 8 8. 7. 6. 5. 4. 3. 2. 1. - 5. LAC: Consumer Prices (% change in 12 months) 6.5 8.2 26 27 28 29 Source CEPAL Prepared by: Programa de Deuda Pública Consumer Prices 4.7 2
27/2/211 Interest Rates declined, and Risk Premiums and Debt increased slightly. 6.% 5.% LA Select Countries: Libor 3M USD & EMBI Spread (% ) 5.2% 5.3% 9 8 7 LAC: Central Government Public Debt 79.7 72.6 71.8 76.5 4.% 3.% 2.% 1.% 3.6% 2.7% 1.8% 1.5% 2.9% 2.7% 3.%.7% 6 5 4 3 2 1 35.8 53.6 47.3 46.1 29.9 28.5 29.9 49..% 25 26 27 28 29 26 27 28 29 Source: Bloomberg Libor 3m Spread EMBI Latin America Caribbean LAC - Total Debt EMBI spread: Annual Average LA (Brazil, Colombia, Mexico and Peru) Gross International Reserves increased in 29 Venezuela Uruguay Dominican Republic Select Countries: Gross International Reserves Paraguay Nicaragua Mexico Jamaica Guatemala Ecuador Costa Rica Colombia Chile Brazil Bolivia Argentina 29 Peru 28 % 1% 2% 3% 4% 5% 6% 2. 1.5 1..5. -.5.8.5.2 Financial Flows 16 1.6 1.3 1.2.2.9.8.8 -.3 -.2 26 27 28 29 Prepared by: Public Debt Program Current Account FDI Capital Account 3
27/2/211 Most countries suffered the economic crisis turning from positive growth in 28 into negative figures in 29 Venezuela Uruguay Suriname St. Lucia Saint Kitts & Nevis Dominican Republic Peru Paraguay Panama Nicaragua Mexico Jamaica Honduras Haiti Guyana Grenada El Salvador Colombia Chile Bolivia Barbados Bahamas Brazil Argentina Antigua & Barbuda LAC Select Countries: GDP Growth (28-29) 29 LAC Aveg: -1.9% 29 28 28 LAC Aveg: 4.2% -15-1 -5 5 1 15 Crisis in Latin America and the Caribbean (LAC) Policy Responses 4
27/2/211 There was a broad response to the crisis. Monetary, Fiscal and Labor policy changes were the most common. 3 25 Latin America and the Caribbean: Policies Responses (37 Countries) Monetary &Finan. Policies Fiscal Policies 27 27 Sectoral Policies Labor & Social Policies 28 26 2 15 1 12 16 19 Exhange Rate & 14 Trade Policies 12 1 17 17 2 13 21 5 6 4 Reserves have increased in 29 Crisis in Latin America and the Caribbean (LAC) Results 5
27/2/211 Contrary to what was expected, the recovery was very fast 1 8 6 4 2-2 -4 LAC: GDP Growth & Urban Unemployment (Annual percentage change) 8.6 5.8 7.9 58 5.8 7.3 4.2 8.2 7.6 6. 26 27 28 29-1.9 21 (p) GDP Growth Unemployment 1.8.6.4 2.2 -.2 -.4 -.6 -.8 LAC: BoP Current Account.8 2.2 -.3 -.2 26 27 28 29 21 (p) Sounce: CEPAL CA -.6 2. 1.. -1. -2. -3. -4. LAC: Fiscal Balance 26 27 28 29 21-1.3-1.1 -.8-5. Source: WEO Oct. 21-4. Fiscal Balance -2.7 9. 8 8. 7. 6. 5. 4. 3. 2. 1. - 5. LAC: Consumer Prices (% change in 12 months) 6.5 82 8.2 4.7 26 27 28 29 21 Prepared by: Programa de Deuda Pública Consumer Prices 6.2 Gross International Reserves continued to increase Selected Countries: Gross International Reserved Venezuela 21 (p) Uruguay República Dominicana 29 Perú Paraguay Nicaragua México Jamaica Guatemala Ecuador Costa Rica Colombia Chile Brasil Bolivia Argentina % 1% 2% 3% 4% 5% 6% Fuente: CEPAL Elaboración: Programa de Deuda Pública Financial Flujos Financieros Flows (% PIB) 2. 1.6 1.6 1.5 1.3 1.2 1.2 1.3 1.2 1..9.8 1..9.8.8.8.7.5.5.8.8.2.5.2.5..2 -.3 -.2 26.2 27 28 29 21 -.5. -.3 -.2 -.6 26 27 28 29-1. -.5 Cuenta Corriente Cuenta Capital Cuenta Corriente Cuenta Capital Fuente: CEPAL Fuente: Elaborado: CEPAL Programa de Deuda IED Elaborado: Programa de Deuda IED 6
27/2/211 The recovery in most countries was rapid, except some countries such as Antigua and Barbuda, Barbados, Haiti, St. Kitts and Nevis, and Venezuela. Brasil Venezuela Uruguay Suriname Santa Lucía Saint Kitts y Nevis República Dominicana Perú Paraguay Panamá Nicaragua México Jamaica Honduras Haití Guyana Granada El Salvador Colombia Chile Bolivia Barbados Bahamas Argentina Antigua y Barbuda Selected LAC: GDP Growth (29-21) 29 21(p) 21 Average LAC: 6% -15-1 -5 5 1 15 Fuente: CEPAL Elaboración: Programa de Dueda Pública (CEMLA) Debt, Interest Rates, and Risk Premiums fell as well as the public debt 6.% 5.% 4.% 3.% 2.% 1.%.% Select Countries: Libor 3M USD & EMBI Spread LA 3.6% 2.7% 5.2% 5.3% 1.8% 1.5% 2.9% 2.7% 3.%.7% 25 26 27 28 29 21 Source: Bloomberg Preperad by: Public Debt Program, Libor 3m Spread EMBI 1.8%.3% EMBI spread: Annual average LA (Brazil, Colombia, Mexico, Peru) 9 8 7 6 5 4 3 2 1 35.8 ALC: Deuda Pública Gobierno Central (% PIB) 79.7 76.5 72.6 71.8 53.6 Fuente: CEPAL Elaboración: Programa de Deuda Pública 47.3 46.1 49. 29.9 28.5 29.9 28.5 26 27 28 29 21 (p) 7
27/2/211 Comparison with countries outside the Region Crisis in Latin America and the Caribbean (LAC) Comparison with countries outside the Region SGIP registered worse indicators than LAC LAC vs SGIP: GDP Growth & Unemployment (Annual Percentage Change) 16 14 12.2 14. 12 1 8.3 8.6 7.9 8 8.2 7.4 7.3 7.3 7.6 6 6. 5.8 5.8 4 2 3.8 4. 4.2 -.2-1.9 -.9-2 26 27 28 29 21-4 -4. -6 / WEO Oct. 21 LAC - GDP SGIP- GDP LAC - Unemployment SGIP- Unemployment 8
27/2/211 The levels of Fiscal Balance and Current Accounts reflect a deeper crisis in SGIP than in LAC. 2.. -2. -4. 4-6. -8. -1. -12. -14. LAC vs SGIP: Fiscal Balance.4-1.1 -.8 26-1.3 27-1.1 28 29 21-2.7-5.5-4. Source: WEO Oct. 21 LAC - FB -12.2 SGIP - FB -1.5 2-2 -4-6 -8-1 -12 LAC vs SGIP: Current Account.8.2 -.3 -.2-8.4-9.7-1.3-7.5 26 27 28 29 21 Source: WEO Oct. 21 LAC - CA SGIP - CA -.6-7.2 9. 8. 7. 6. 5. 4. 3. 2. 1. - 5. LAC vs SGIP: Consumer Prices (% change in 12 months) 6.5 8.2 3.1 3. 3.2 4.7 6.2.7.9 26 27 28 29 21 / WEO Oct. 21 LAC - Inflation SGIP - Inflation The large fiscal deficits generated high levels of debt/gdp in SGIP. LAC vs SGIP: Central Government Public Debt (% DGP) 1 9 8 7 6 5 4 35.8 79.77 72.6 56.4 53.6 54.9 71.8 47.3 46.1 62.2 77.5 76.5 49. 92.6 3 29.9 28.5 29.9 28.5 2 1 26 27 28 29 21 (p) / WEO Oct. 21 Latin America LAC - Total Debt Caribbean SGIP - Total Debt 9
27/2/211 Perspectives of the Region After significant recovery in 21, the mid-term looks promising 7 6 5 4 3 2 1-1 -2-3 4.2 LAC: GDP Growth Perspective (Annual percentage change) 6. 4. 4.2 4.1 4. 28 29 21 211 212 213 214-1.9 / WEO Oct. 21 GDP Growth LAC: Fiscal Balance 2. 1.. -1. 28 29 21 211 212 213 214-2. -.8-1.9-1.8-3. -2.3-2.1-2.7-4. -4. -5. Source: WEO Oct. 21 Fiscal Balance. -.2 -.4 -.6 -.8-1. -1.2-1.4-1.6-1.8-2. -.7 LAC: BoP Current Account -.6-1.2-1.6-1.8-1.7-1.7 28 29 21 (p) 211 212 213 214 Source WEO Oct. 21 CA 1
27/2/211 Some characteristics of LAC Debt Although the situation has improved in LAC, some countries still have high debt. 14 LAC: Central Government Public Debt 12 1 8 6 4 2 Elaborated by: Public Debt Program 28 29 21 (p) 11
27/2/211 External public debt decreased in relation to domestic public debt. 1 Domestic Debt / External Debt (% Total Debt) 1 1 59% 55% 54% 53% 1 41% 44% 45% 47% 26 27 28 29 STAT Prepared: Public Debt Program Domestic Debt External Debt There are some LA countries where the external debt ratio is high. 6 LA: Composition of Public Debt (29, % GDP) 5 48.5 44.5 44.1 4 36.3 35. 41.7 38.6 3 2 3.2 16.3 3.7 27.4 17.4 23.3 24.3 28.3 15.7 23.4 28. 1 14.11 6.1 Fuente: CEPAL Elaboración: Programa de Deuda Pública External Debt Domestic Debt Total 29 12
27/2/211 The proportion of external debt is higher in the Caribbean than in Latin America. 14 Caribbean: Composition of Public Debt (29, % GDP) 12 115.2 118.5 1 9.2 11.7 86.8 95.8 14.6 8 76.5 72.3 6 4 43.8 43.6 57.8 63.2 2 32.7 25.7 19. External Debt Domestic Debt Total 29 Regarding the refinancing risk of External Debt, LAC shows no major problems. 12. Composition of Debt: Short and Long Tem 1. 8. 6. 88.5 85.4 85.3 87.6 87.4 4. 2.. 11.5 14.6 14.7 12.4 12.6 26 27 28 29 21 Source: WEO Oct. 21 Short-term / Total External Debt Long-term /Total External Debt 13
27/2/211 DeMPA: Results in the Region DeMPA in 6 Countries: Guyana, Honduras, Nicaragua, St. Kitts y Nevis, Granada y Antigua y Barbuda. Best DPI1,2,6,7,8. Worst 3,4,5,9,11,13 DPI 15. Debt Reporting DPI 1. Legal Framework 6 DPI 2. Managerial Structure DPI 14. Debt Records 4 DPI 3. Debt Management Strategy DPI 13. Segregation of Duties, Staff Capacity and Business Continuity 2 DPI 4. Evaluation of Debt Management Operations DPI 12. Debt Administration and Data Security DPI 5.Audit DPI 11. Cash Flow Forecasting and Cash Balance Management DPI 6. Coordination with Fiscal Policy DPI 1. Loan Guarantees, On-lending and Derivatives DPI 9. External Borrowing DPI 7. Coordination with Monetary Policy DPI 8. Domestic Market Borrowing C or Higher Score D 14
27/2/211 Conclusions The impact of the crisis was particularly evident in 28 and part of 29, but quickly began recovering in 29. The main impact was in the real sector, and the first response a stimulus that reduced borrowing needs. The output of the crisis was fast than expected (6% of GDP) in 21. This shows LAC was better prepared than in other times: Better prepared in terms of stocks, lower levels of debt with better conditions, and higher levels of reserves. Better prepared in term of flows: fiscal balances and current account balances. Better prepared with strengthened policies and institutions. Conclusions (Cont.) However, we must take into account differences in debt in the region. Emerging countries have a better debt situation. ti The emissions made after the crisis were well received by the markets with better terms than anticipated (Mexico) The debt sustainability of some Post HIPCs countries is not guaranteed. (Nicaragua, Guyana) The situation of some Caribbean countries is even more fragile. There is room for improvements in debt management in several countries 15
27/2/211 Key issues for countries Assess debt management and define the actions for improvements (Reform Plan, FRF) Availability of financing: Quality and Quantity The design and implementation of debt strategies and funding is crucial: Levels remain very important, some need to carry out Debt Sustainability Analyses regularly. For countries with access to various sources of financing, cost and risk analysis is crucial. Workshop with BM and CEMLA Debt Management Performance Assessment Tool (DeMPA) Overview of Debt Management in LAC Mexico City, Mexico February 28th March 4th, 211 Jaime Coronado Coordinator Public Debt Program, Payment Systems and Credit Reporting Program 16