Restructuring Sovereign Debt: The Case for Ad Hoc Machinery / Edition 1

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Overview

The Western powers established the International Monetary Fund (IMF) and the World Bank after World War II as "permanent machinery" to anchor the Bretton Woods system. When developing countries began experiencing debt problems in the late 1960s, the Paris Club took shape as "ad hoc machinery" to restructure debt from export credit agencies. A decade later the London Club process emerged to handle workouts of commercial bank debt. Restructuring debt in the form of bonds became an issue in the late 1990s in Argentina and several other nations, and the IMF recently proposed a permanent mechanism to deal with that challenge. Restructuring Sovereign Debt explains why ad hoc machinery would function more effectively in the Bretton Woods system.

By describing in detail the origins and operations of the London Club and Paris Club, Lex Rieffel highlights the pragmatism and flexibility associated with ad hoc approaches. He also recalls earlier proposals for creating permanent debt restructuring machinery and the reasons why they were not adopted. Recognizing that the issue of sovereign debt workout is complex, Rieffel has provided a comprehensive and detailed exposition of this important policy issue.

Rieffel's book is an important tool for policymakers and the public, particularly as the global community seeks to resolve the debt problems of countries as diverse as Argentina, Iraq, and Côte d'Ivoire.

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Editorial Reviews

From the Publisher

"In this useful reference, Rieffel, for many years an official at the U.S. Treasury, provides a thorough account of the post-1950 evolution of procedures for dealing with sovereign debt owed to both official and private creditors. After critically examining proposals for major institutional overhauls, he vigorously defends the ad hoc, evolutionary approach, while offering his own recommendations for modest improvements on current practices." —Richard N. Cooper, Foreign Affairs, 1/1/2004

"... Rieffel writes with authority on the history of developing countries' debt crises. He describes this difficult and complex subject concisely and meticulously.... The first four chapters are an excellent primer on the subject, and could stand alone. The later chapters provide a wealth of detail.... getabstract.com recommends this book to bankers involved with making loans to foreign countries, to government policymakers in borrower countries and lender countries, and to anyone seeking a detailed exploration of how countries pay their debts." — getAbstract, 7/1/2004

"An impressive sum of work on sixty years of sovereign debt restructuring practices and heated debates over the role of the public and the private sector. While we may not agree on all views, Lex Rieffel's book gives a well-informed and challenging insider's view on the Paris Club and very useful historical background, which will help make our procedure more understandable to the public." —Jean-Pierre Jouyet, Paris Club Chairman

"A true masterpiece dealing with one of the most complex and topical issues of international finance. To my knowledge, this is the most comprehensive and well-documented book on the subject. Rieffel covers not only the detailed history of the different debt crises but also analyzes the evolution of the specific instruments and methods which have been used to resolve these problems. For students, researchers, practitioners, issuers, creditors, and international finance organizations, this book will provide an invaluable treasure of information and reflection." —Jacques de Larosiere, adviser to the chairman, BNP Paribas, and former managing director; International Monetary Fund

"Much of the current literature on sovereign debt is profoundly critical of the ways in which debt crises have been handled. Rieffel takes a different tack. He provides a compact, readable account of a complex story that is not readily available elsewhere. He then uses it to fashion a trenchant defense of the customized, case-by-case approach adopted initially in the 1980s. He argues forcefully for further adaptation rather than dramatic innovation." —Peter B. Kenen, Walker Professor of Economics and International Finance, Princeton University

"As one who has chaired numerous country negotiations over two decades, I appreciate Lex Rieffel's understanding of the political forces that vary from case to case. He successfully makes the argument that the case-by-case process is the only realistic approach to sovereign debt restructuring. His book explains the nuts and bolts of restructuring and he fully understands the London Club process. He reminds us that successful agreements depend on ever-closer cooperation among all parties, including borrower countries, creditor countries, mulitilateral agencies and private creditors." —William R. Rhodes, Citigroup senior vice chairman and Citibank chairman

Foreign Affairs
In recent decades, countless governments have borrowed too much abroad and subsequently had to reschedule or scale back their payments to foreign creditors (Argentina being only the most recent in a long list). As a result, there have been various suggestions for streamlining, formalizing, and legalizing the procedures for dealing with sovereign debt problems. But in fact, reasonably orderly procedures have developed on an informal basis as collective experience builds. In this useful reference, Rieffel, for many years an official at the U.S. Treasury, provides a thorough account of the post-1950 evolution of procedures for dealing with sovereign debt owed to both official and private creditors. After critically examining proposals for major institutional overhauls, he vigorously defends the ad hoc, evolutionary approach, while offering his own recommendations for modest improvements on current practices.
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Product Details

  • ISBN-13: 9780815774464
  • Publisher: Brookings Institution Press
  • Publication date: 9/28/2003
  • Edition description: New Edition
  • Edition number: 1
  • Pages: 368
  • Product dimensions: 6.20 (w) x 9.10 (h) x 1.00 (d)

Meet the Author

Lex Rieffel is a nonresident senior fellow in the Brookings Institution's Global Economy and Development Program.

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Table of Contents

Preface
List of Acronyms
1 Sovereign Default in the Bretton Woods Era 1
2 Fundamental Concepts 9
3 The Main Players 24
4 Fundamental Issues 45
5 The Paris Club 56
6 The Bank Advisory Committee (London Club) Process 95
7 The North-South Dialogue in the 1970s 132
8 The Debt Crisis of the 1980s and the Brady Plan Solution 149
9 The HIPC Initiative in the 1990s 178
10 The Post-1994 Crises and the Role of Bonds 188
11 The Debate over Private Sector Involvement, 1995-2002 220
12 What Is Broken? What Fixes Make Sense? 260
App. A "Countries Don't Go Bankrupt" 289
App. B Five Milestone Cases 295
References 317
Index 327
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Sort by: Showing 1 Customer Reviews
  • Anonymous

    Posted July 28, 2004

    A Good Read!

    Author Lex Rieffel writes with authority on the history of developing countries' debt crises. He describes this difficult and complex subject concisely and meticulously. To be sure, he wrote this text as an argument for a specific policy objective (keeping flexibility in the sovereign debt workout process), and does not shy away from hammering his point home multiple times. However, his agenda in no way diminishes the accuracy of his history or his factual descriptions of the entities that shaped it. The first four chapters are an excellent primer on the subject, and could stand alone. The later chapters provide a wealth of detail, perfect for those who need it, albeit a bit tedious for anyone not directly involved in sovereign lending. We recommend this book to bankers involved in making loans to foreign countries, to government policymakers in borrower countries and lender countries, and to anyone seeking a detailed exploration of how countries pay their debts.

    Was this review helpful? Yes  No   Report this review
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