The Global Impact of Debt Rescheduling

Abstract

Since the summer of 1982, the restructuring of sovereign debt has become a predominant activity of the international capital markets with perhaps $ 100 billion in external debt to commercial banks and suppliers being renegotiated. This is in sharp contrast with the experience of the 1960s and 1970s when sovereign debt rescheduling was a rare occurrence for commercial banks. The recent experience also differs from earlier episodes of sovereign debt default in the nineteenth and early twentieth centuries. Most of those credits were raised in European bond markets and the debt was largely held by private individuals. When countries defaulted on those bonds, the creditor community had little international leverage except through a cumbersome political system.

The views expressed are those of the author and do not necessarily represent those of the Chase Manhattan Bank