Public debt sustainability in the northern countries of Latin America
Work area(s)
Public debt sustainability in the northern countries of Latin America
- Author: Paunovic, Igor
- Physical description: páginas. 95-112
- UN symbol (Signature): LC/G.2287-P
- Date: 1 December 2005
Abstract
An analysis of public debt indicators in eight northern countries of
Latin America reveals that Nicaragua and Honduras are the most
vulnerable; Panama, the Dominican Republic, Costa Rica, and El Salvador
are moderately vulnerable; while Mexico and Guatemala have debt levels
that are not considered dangerous. Nonetheless, a subsequent review of
four indicators of fiscal sustainability shows only Mexico to be well
positioned under all criteria; Costa Rica and Guatemala display a number
of minor problems, while various special circumstances explain the
favourable results obtained by Nicaragua and the Dominican Republic;
and El Salvador, Honduras and Panama will be unable to sustain their
2004 fiscal policy for very long. Lastly, analysis of the sensitivity of the
debt to a sudden stop in foreign capital inflows suggests the need for a
cautious attitude towards the future trend of the public debt in the face of
rising international interest rates.