This appendix presents debt profiles for 26 Latin American and Caribbean countries. The methodology used to collect the data is summarized in Box 2.2 and described in greater detail in Cowan et al. (2006). It is important to note that, during 2004–2006, several countries in the region experienced real appreciation and robust GDP growth, and this allowed them to reduce their debt ratios to implement policies aimed at improving their debt profiles. These recent changes are not reflected in this appendix, which uses data up to 2004. The analysis stops at that point for two reasons. First, while it is possible to find more recent data, these more recent data could not be made comparable using the methodology described in Box 2.2. Second, while historical debt statistics are extremely hard to collect, more recent data can easily be found in publications of the multilaterals (such as IMF Article IV agreements) and of major investment banks or commercial providers of economic data (such as the Economist Intelligence Unit). The data used in this appendix are available at www.iadb.org/res/pub_desc.cfm?pub_id=DBA-007.
| Argentina |
In the mid-1980s Argentina accumulated substantial external debt, mostly in the form of international bank loans, but with a large official (both bilateral and multilateral) component (Figure A.1). In 1989 there was a sharp increase in the external debt-to-GDP ratio (from 32 percent of GDP in 1988 to 53 percent in 1989) which was due not to an increase in the dollar value of debt, but to a deep economic crisis and real devaluation, which reduced the dollar value of GDP by 35 percent.1 Subsequently, the Brady swap led to a reduction in debt held by foreign banks and a switch toward sovereign bond issuances (foreign bonds went from 1 percent of GDP in 1992 to 13 percent of GDP in 1993, and foreign bank loans dropped from 9 percent of GDP to less than 1 percent of GDP). From the mid-1990s, the country’s external debt increased gradually until the economic crisis and devaluation of 2001, which reduced the dollar value of GDP by 62 percent and led to a sudden jump in the external debt-to-GDP ratio from 30 to 82 percent of GDP.
The early 1990s witnessed a gradual decline in the total debt-to-GDP ratio in Argentina. As external debt was either constant or increasing during this period, this decline was entirely the result of lower domestic debt. At the beginning of the 1990s, the country’s debt was evenly distributed between domestic and foreign holders, but by 1994, 72 percent of Argentina’s public debt was external. During the 1994–2001 period the increase in Argentina’s debt was gradual and mostly financed by foreign-currency-denominated domestic debt.2 The crisis of 2001 led to a sudden jump in the debt-to-GDP ratio (which went from 54 percent in 2001 to 135 percent in 2002). This increase in the debt-to-GDP ratio was partly due to the large real devaluation resulting from the crisis, but it was also due to the costs of rescuing the country’s financial system and to bonds issued to retire some of the debt issued by provincial governments. The bank rescue operations and the “pesification” of foreign currency debt held by domestic institutions and individuals led to a reduction in the share of foreign currency debt to 70 percent of total debt (30 percent of domestic debt) from a peak of 90 percent in 1997 (68 percent of domestic debt) (Figure A.2). In January 2006, Argentina was able to repay all of its debt to the IMF for the first time since 1982.
In Argentina, local governments issue a substantial amount of debt. Subnational debt (issued mostly by the provinces but also by the City of Buenos Aires) grew from 4 to 6 percent of GDP over the 1996–2000 period and then jumped to 10 percent of GDP over the 2000–2002 period; most of this debt was denominated in foreign currency.3 Over the 2002–2004 period the central government assumed a large amount of subnational debt by issuing “Bonos Garantizados” (Bogar) for an amount close to 6 percent of GDP. This led to a substantial reduction in subnational debt, which by 2004 had fallen back to 6 percent of GDP.
Methodological issues. The main source of data for Argentina is the ministry of the economy, which does not, however, separate domestic from foreign bank debt. As a consequence, domestic bank debt was obtained by subtracting the foreign bank debt reported by the World Bank’s Global Development Finance (GDF) from total bank debt reported by the ministry of the economy. As the ministry of the economy classifies data on marketable debt by the holder’s place of residence, it was necessary to reclassify this information in order to match the methodology described in Cowan et al. (2006).
| The Bahamas |
The Bahamas has moderate levels of public debt even though public debt grew at a fast pace over 2000–2003 (Figure A.3) and total public debt is much higher than central government debt (the debt of public enterprises is above 10 percent of GDP, leading to a level of debt in the general government of close to 50 percent of GDP). Traditionally, The Bahamas has had a debt structure similar to that of industrial countries, with almost all debt issued domestically and denominated in domestic currency. However, over 2002–2003 external central government debt more than doubled (this was partly compensated for by a reduction in the external debt of state-owned enterprises).
| Barbados |
Barbados has levels of debt which are above the Latin America and Caribbean averages. Public debt grew very rapidly over the 1980–1994 period, then decreased somewhat in the second half of the 1990s, but started growing again in 1999 (Figure A.4). On the positive side, about three-quarters of the country’s total public debt is domestic and denominated in domestic currency, and this makes Barbados much less vulnerable to a possible debt crisis than countries with similar levels of debt but a larger share of external debt and debt denominated in foreign currency.
| Belize |
Belize’s external debt increased steadily in the first half of the 1980s (from 25 percent of GDP in 1980 to 50 percent in 1985) and then decreased over the 1985–1993 period from 50 percent of GDP to 30 percent of GDP (Figure A.5). Until the late 1990s most of Belize’s external debt was held by official creditors (with a large share of bilateral debt), but starting in 2000, international bank loans became increasingly important, and they now account for more than 50 percent of the country’s external debt (they represented only 7 percent of its external debt in 1995). This increase in foreign bank debt coincided with an explosion in Belize’s debt-to-GDP ratio, which went from around 60 percent in 2000 to more than 95 percent in 2004. Data for domestic debt are available from 1994 (there are no data on the currency composition of domestic debt). Domestic debt did not change much during the period for which data are available (ranging from 10 to 13 percent of GDP), and its share in total debt dropped substantially over the 1994–2004 period. Following the methodology discussed in Cowan et al. (2006), the data in Figure A.5 do not include debt issued by the Development Finance Corporation, a state-owned development bank which issues a large amount of debt and is considered by the IMF to be a drain on the country’s public finances (IMF, 2004a).4
| Bolivia |
Bolivia has had a high debt-to-GDP ratio and has benefited from debt relief initiatives. The country’s external debt grew through most of the 1980s, from 53 percent of GDP to a peak of 107 percent in 1987. This increase was mostly financed through bilateral official lending, which rose from 19 percent of GDP in 1980 to 56 percent in 1987. Multilateral official lending has also become increasingly important for Bolivia, and its share increased from 18 percent of GDP in 1985 to 46 percent of GDP in 2004 (Figure A.6). Bilateral debt gradually declined beginning in 1999, with relief provided under the Heavily Indebted Poor Countries (HIPC) Initiative. This decline, however, was offset by the increase observed in both multilateral external debt and domestic debt. The latter experienced a particularly sharp rise, from 1 percent of GDP in 1994 to 23.3 percent in 2004, mostly coinciding with the marked deterioration in public finances in the period 1999–2003. More recently, Bolivia’s total public debt decreased substantially, from 76.4 percent of GDP in 2004 to an estimated 50.8 percent of GDP in 2006, principally as a result of major debt relief initiatives (HIPC, Enhanced HIPC, and the Multilateral Debt Relief Initiative [MDRI]). As in several other countries with a large share of concessional debt, reported public debt overstates the level of indebtedness when measured in net present value (NPV). In NPV terms, Bolivia’s total public debt declined from 57.7 percent of GDP in 2004 to an estimated 32.3 percent in 2006. Most of the country’s domestic debt is denominated in foreign currency, although in recent years local-currency-indexed debt (tied to the Unidad de Fomento de Vivienda inflation index) has been issued. Bolivia’s central bank reserve position has been increasing (net international reserves as of the end of July 2006 were approximately US$2.6 billion, or 136 percent higher than in 2004). If Bolivia’s total public debt net of international reserves were used in the calculation, it would lower the nominal debt-to-GDP ratio to an estimated 27 percent at the end of 2006.
Methodological issues. The data for multilateral and bilateral debt were obtained from GDF and the Central Bank of Bolivia. The data for foreign bank and marketable debt were obtained from GDF.
| Brazil |
In the early 1980s Brazil’s external debt averaged 25 percent of GDP, but in 1982 it jumped to 41 percent of GDP, and it reached 49 percent of GDP in 1984. Starting in 1984, the country’s external debt-to-GDP-ratio decreased steadily until 1997 (due to a growing GDP and a constant dollar value of external debt), when total external debt reached 15 percent of GDP (Brazil was in default between 1983 and 1994), and then started increasing again, reaching a peak of 32 percent of GDP in 2003 (but decreasing to 25 percent of GDP in 2004).
Until 1993, most of Brazil’s external debt was owed to international banks (over the 1980–1993 period foreign bank loans represented 70 percent of total external debt). The Brady swap led to a sudden increase in bond financing, and bond debt now represents more than 15 percent of GDP and about 55 percent of external debt (Figure A.7). IMF financing became increasingly important over the 1990–2004 period and reached 16 percent of GDP in 2004 (all of Brazil’s IMF debt was repaid in 2006).
The reduction in external debt documented above was accompanied by a net increase in domestic debt (which went from 22 percent of GDP in 1994 to 55 percent of GDP in 2004). As a consequence, Brazil’s total debt increased substantially over the 1994–2001 period (from about 40 percent of GDP to about 80 percent of GDP). The country’s domestic debt is mainly denominated in domestic currency (however, there were significant issuances indexed to foreign currencies during 1999–2001). In the late 1990s there was an increase in the proportion of the country’s domestic debt indexed to foreign currency or to prices (Figure A.8), but then this component of debt showed a net decrease between 2001 and 2004. A large share of Brazil’s debt is floating rate debt (this is local currency debt indexed to the overnight interest rate) (Figure A.9). The amount of this debt, however, decreased in late 2005 and early 2006, reducing the vulnerability of the Brazilian debt structure (over the 2000–2006 period the share of fixed rate debt rose from 9.5 to 28 percent of total domestic debt, and the share of debt indexed to inflation increased from 6 to 20.5 percent of total domestic debt).
Methodological issues. The data for Brazil used in this report tend to differ from the data reported by official sources because Brazil focuses on net rather than gross debt. One major source of difference is the treatment of state and local governments. These governments have issued large amounts of bonded debt over the years and were bailed out several times by the central government (in 1989, 1993, and 1997). As a consequence, state and local governments now have a large debt to the federal government. In official statistics, this debt is reported as subnational debt and netted out from the federal government debt. In this report, subnational debt is included in the federal government debt and not reported as debt of the subnationals. In fact, under the definition of subnational debt used in this report, state and local government debt went from 9 percent of GDP in 1992 to 4.5 percent of GDP in 1997 and then remained below 1 percent of GDP for most of the 2000–2004 period. Official figures, in contrast, show higher and increasing (close to 20 percent of GDP in 2003) levels of net subnational debt. When one considers total debt (federal plus state and local), however, the debt figures used in this report are similar to official statistics.
As Brazil focuses on net debt, the composition of the debt was available only for net debt, and hence it was necessary to assume that the composition of gross debt was the same as that of net debt.
The netting strategy used in this report differs substantially from the netting strategy used by the Brazilian authorities (for more details see Box 2.3). Figure A.10 compares the data used here with the official figures reported by Brazil’s central bank. All data refer to the nonfinancial public sector (i.e., excluding the central bank). In spite of not being identical, the two data sets yield similar figures for gross public debt (in fact, in both cases the average value of the debt-to-GDP ratio over the 1998–2004 period was exactly 67 percent of GDP). However, there are large differences for the net debt figures. In particular, the netting strategy used in this report would yield much higher levels of net debt. Focusing on Net Debt 2 (see Chapter 2 for details), this report finds that the average debt-to-GDP ratio over the 1998–2004 period was 61 percent, while official figures suggest an average debt-to-GDP ratio of approximately 50 percent.
| Chile |
Chile’s external debt increased steadily during the early 1980s, reaching 44 percent of GDP in 1986. This increase was mainly accounted for by higher debt due to credit from multilateral institutions (which went from 1 percent of GDP in 1980 to 12 percent in 1986) and foreign bank loans (which went from 3 percent of GDP in 1980 to 22 percent in 1986) (Figure A.11).5 The dollar value of external debt stopped increasing in the late 1980s and, thanks to economic growth, the external debt-to-GDP ratio started decreasing, reaching a minimum of 3 percent of GDP in 1998 (over the 1987–1997 period, debt owed to foreign banks declined from 18 percent of GDP to less than 1 percent of GDP, and official debt decreased from 23 percent of GDP to less than 3 percent of GDP). The dollar value of external debt increased over the 2001–2004 period but, thanks to rapid GDP growth, the external debt-to-GDP ratio remained well below 10 percent. In 2004 external debt was 5 percent of GDP, with 3 percent of GDP in bonded debt and 2 percent of GDP owed to official creditors.
In 1989 domestic debt stood at 73 percent of GDP, representing 71 percent of total debt (which was 104 percent of GDP). Starting in 1990, domestic debt decreased gradually, reaching 43 percent of GDP in 2004. (As domestic debt decreased at a slower rate than external debt, however, its share in total debt rose, reaching 90 percent.)
Among countries covered in this appendix, Chile has the largest share of indexed debt; the peak of indexation was reached in 1997, when more than 80 percent of domestic public debt was indexed to prices. By 2004, 60 percent of domestic debt was indexed to prices, 14 percent was denominated in foreign currency, and the remaining 26 percent was in nominal pesos.
Chile’s central bank holds a substantial amount of reserves and government paper (in some cases up to 30 percent of GDP); if these assets are netted out from the gross debt, the country’s debt-to-GDP ratio drops dramatically. In 2003 gross debt was 58 percent of GDP (48 percent in 2004), but net debt stood at 28 percent of GDP (in 2004 it was 25 percent of GDP). The line in Figure A.12 shows the debt-to-GDP ratio obtained if central bank debt is not included in the total.
Methodological issues. Interpreting the Chilean data is complicated, because the central bank issues a large amount of debt (including bonds related to support of weak banks in the 1980s), but it also holds a large amount of assets (part of these assets are through the Petroleum Stabilization Fund and the Copper Compensation Fund). According to the methodology described in Cowan et al. (2006), some of these assets have not been netted out of the total debt, so this methodology yields debt-to-GDP ratios which are much higher than those reported by Chilean authorities. Dropping debt issued by the central bank from the figures reported here yields data which are similar to standard Chilean debt statistics.
| Colombia |
Colombia’s external debt increased substantially during the first half of the 1980s, going from US$4.6 billion (14 percent of GDP) in 1980 to more than US$13 billion (32 percent of GDP) in 1987. The increase was financed by foreign bank loans (which went from 5 percent of GDP in 1980 to 12 percent of GDP in 1985) and lending by multilaterals (which went from less than 10 percent of GDP in 1980 to 15 percent of GDP in 1987). Over the 1990s, foreign bank loans became gradually less important, and by 2004 they represented only 8 percent of external debt, with the decrease being offset by an increase in bonded debt, 
which rose from less than 1 percent of external debt in 1986 to 50 percent in 2004 (Figure A.13). The swap of foreign loans for bonds was not as dramatic as in other Latin American countries, because Colombia did not default on its loans and therefore did not participate in the Brady exchange. Thanks to economic growth, external debt as a percentage of GDP started decreasing in 1990 (the dollar value remained more or less constant until 1995), reaching a minimum of 15 percent in 1997. The subsequent increase (which brought external debt back to 27 percent of GDP) was financed mostly by issuing foreign bonds (which went from 4 percent of GDP in 1997 to 13 percent of GDP in 2004).
While Colombia’s external debt-to-GDP ratio stabilized after 2001, domestic debt kept growing over the 1995–2004 period (going from 11 percent of GDP in 1995 to more than 30 percent of GDP in 2004). Colombia substantially increased the share of its domestic debt issued in foreign currency over the 1995–2002 period, from 14 percent to 29 percent of total domestic debt. This trend has reversed, however, since 2003. Hence, while domestic debt was substituted for foreign debt, the currency denomination of the country’s debt did not vary substantially over the period under observation, and the share of foreign currency debt remained more or less constant, hovering at around 60 percent of total debt (Figure A.14).
Colombia’s central bank holds substantial reserves; if these reserves are netted out from total debt, the country’s debt-to-GDP ratio drops by almost 15 percentage points.6 Furthermore, regional governments in Colombia also hold a substantial amount of central government debt. Netting out these holdings would further reduce the Colombian debt-to-GDP ratio.
| Costa Rica |
Costa Rica’s external debt increased dramatically in the early 1980s, going from US$1.5 billion (37 percent of GDP) in 1980 to more than US$2.6 billion (100 percent of GDP) in 1982, with the increase triggered by both an increase in the dollar value of debt (Figure A.15) and an economic crisis and real devaluation which reduced the dollar value of GDP by almost 50 percent. External debt started decreasing in the late 1980s (Costa Rica was in default between 1983 and 1990) and stabilized at about 20 percent of GDP in the late 1990s (Figure A.16). Multilateral and bilateral debt decreased gradually (the former went from 24 percent of GDP in 1983 to 8 percent of GDP in 2004, while the latter decreased from about 20 percent of GDP to 2 percent of GDP), and nonofficial debt decreased drastically at the time of the Brady exchange. The Brady swap led to a decline in foreign bank loans from about 10 percent of GDP in 1990 to less than 1 percent of GDP in 1991 and an increase in foreign bonds from less than 1 percent of GDP to 8 percent of GDP. From 1991, debt issued to bilateral lenders was reduced significantly and was offset by a further increase in bonded debt.
The counterpart to the decrease in external debt documented above was a steady increase in domestic debt, which went from 25 percent of GDP in 1984 to 38 percent of GDP in 2004. While domestic debt in Costa Rica has traditionally been denominated in domestic currency, the share of foreign-currency-denominated domestic debt has been increasing since the mid-1990s and in 2004 was close to 30 percent of total domestic debt. Costa Rica’s central bank holds large reserves, and if these reserves are netted out, the debt-to-GDP ratio drops by approximately 10 percentage points.
Methodological issues. The data were constructed using information provided by Costa Rica’s central bank. Although state-owned institutions hold a significant part of the country’s domestic debt, these cross-holdings were not subtracted from gross debt in the computation of net debt.
| Dominican Republic |
External debt in the Dominican Republic grew rapidly during the first half of the 1980s, going from 15 percent of GDP in 1980 to 70 percent of GDP in 1985 (Figure A.17).7 The sudden reduction in the country’s external debt in 1984 and the large jump the following year are explained by a large real appreciation (which increased the dollar value of GDP by 50 percent) and a subsequent large real depreciation (which decreased the dollar value of GDP by 60 percent). The country’s external debt started decreasing in the early 1990s, reaching a minimum of 18 percent of GDP in 2000 (the Dominican Republic was in default from 1982 to 1994).
After the Brady swap implemented in 1993 (which led to a reduction of foreign bank debt from 13 percent of GDP in 1993 to 1 percent in 1994 and an increase in bonded debt from 0 to 5 percent of GDP for the same period) and until 2001, most of the Dominican Republic’s external debt was owed to official creditors (with bilateral creditors being the largest group). A banking crisis in the country in 2003 was soon followed by an explosion of both external and domestic debt.
| Ecuador |
At the beginning of the 1990s Ecuador was characterized by extremely high levels of public debt (117 percent of GDP in 1990) (Figure A.18). Over the 1990–1997 period, external debt displayed a decreasing path, reaching a minimum of 59 percent of GDP in 1997 (Ecuador was in default between 1992 and 1995). The country’s debt increased slightly in 1998 and, after a large real devaluation, jumped back to 100 percent of GDP in 1999. Thanks to a debt restructuring and favorable macroeconomic conditions, Ecuador’s debt decreased substantially over the 1999–2004 period, reaching 49 percent of GDP in 2004.
Ecuador’s debt is mainly external (even though domestic debt increased from 3 percent of GDP in 1990 to 11 percent of GDP in 2004), with significant official debt (in 2004 bilateral and multilateral debt represented more than one-third of total debt and almost 50 percent of external debt). In the early 1990s most of Ecuador’s nonofficial external debt was with foreign banks, and after the Brady swap, which took place in 1995, this form of financing almost completely disappeared.
Methodological issues. The currency composition of Ecuador’s domestic debt is not available. However, anecdotal evidence suggests that this debt has been traditionally denominated in foreign currency. In 2000, Ecuador adopted the U.S. dollar as its official currency and, since then, all of its domestic debt has been denominated in U.S. dollars.
| El Salvador |
El Salvador’s external debt rose sharply during the first half of the 1980s (this was the worst period of the country’s civil war, and public debt went from 14 percent of GDP in 1980 to 71 percent of GDP in 1986), with an increase in its multilateral, IMF, and bilateral components (until recently almost all of El Salvador’s external debt was with official creditors). In 1987 the country’s external debt-to-GDP ratio started decreasing, falling from 72 percent of GDP in that year to 20 percent of GDP in 1998 (over the 1987–1998 period, El Salvador’s multilateral debt decreased from 31 percent to 15 percent of GDP, and its bilateral debt decreased from 35 percent to 5 percent of GDP). This decrease was due to GDP growth in the presence of a constant dollar value of external debt (Figure A.19). El Salvador’s external debt started increasing again in the late 1990s and reached 21 percent of GDP in 2004 (this increase was mainly financed through the issuance of foreign bonds, which went from 5 percent of external debt in 1999 to 32 percent of external debt in 2004); the main reason for this increase in debt was reconstruction following a major earthquake that hit the country in 2001. Domestic debt was around 20 percent of GDP in 1990, and it escalated to between 23 and 30 percent of GDP over the 1993–1998 period. In fact, during this period, the increase in the country’s external debt was partly compensated for by higher levels of domestic debt. As a consequence, El Salvador’s total debt decreased at a much slower pace (going from 60 percent of GDP in 1990 to 44 percent of GDP in 1998). Over the 1998–2004 period, the country’s domestic debt did not change much, oscillating between 13 and 16 percent of GDP.
El Salvador’s central bank holds large international reserves (up to 16 percent of GDP in 1999), and netting these reserves from total debt substantially reduces the country’s debt-to-GDP ratio. In 2004, the country’s gross debt was 45 percent of GDP, but its net debt was close to 33 percent of GDP.
| Guatemala |
Guatemala’s total debt increased substantially over the 1980s, going from 19 percent of GDP in 1980 to 49 percent of GDP in 1987 (Figure A.20). In the first half of the 1980s, the increase in the country’s debt was financed by issuing both domestic and external debt, but from 1985 on, debt issued to foreign creditors gradually became more important. Guatemala’s debt started declining at the beginning of the 1990s, reaching 17 percent of GDP in 1998. Over the 1990s most of Guatemala’s external debt was held by official creditors (both bilateral and multilateral lenders), but since then bonds have become increasingly important, and by 2004 they had become the country’s second-largest source of external financing. Domestic debt, which was around 9 percent of GDP in 1980, increased during the first half of the 1980s, to 22 percent of GDP in 1984, but declined subsequently, reaching 6 percent of GDP in 2004 (domestic debt dropped from 50 percent of total debt in the 1980s to about 30 percent in 2004).
Since 1995, Guatemala’s central bank has been accumulating large reserves, and the difference between its gross and net debt (which was negligible in the mid-1990s) is now substantial (in 2004, the country’s gross debt was 21 percent of GDP, and its net debt was 7 percent of GDP).
Methodological issues. As GDF data differ substantially from the data provided by the Guatemalan authorities (with the former source reporting much higher debt levels, the average difference over the 1990–2003 period was 2.5 percent of GDP), the following procedure was used to calculate the debt levels used in this report.8 Total external debt reported by the central bank was used to compute the total debt of the central bank, the central government, and the rest of the public sector. Next, the debt was broken down into various subgroups using information from IMF reports, Bloomberg (for bonded debt), and GDF (for multilateral and bilateral debt). One source of discrepancy is that some bonds are guaranteed by the World Bank and hence are classified as multilateral debt by GDF. For the classification of this report, these bonds were subtracted from the multilateral debt. Data on the amount of foreign bank loans were obtained as a residual entity.
| Guyana |
Guyana is characterized by high levels of debt, both domestic and external, and it is part of the HIPC initiative. Its total public debt decreased dramatically in the first half of the 1990s and then decreased again after 1998 thanks to the debt relief provided by the initiative. While the data reported here end in 2004, more recent data would show a further decline in debt due to additional debt relief brought about within the framework of the MDRI. It is also worth mentioning that, as a large share of Guyana’s debt is concessional and as the data in Figure A.21 focus on nominal figures, they greatly overstate the net present value of the country’s debt ratio.
| Haiti |
Haiti has high levels of debt, both domestic and external, and is part of the HIPC initiative even though it has yet to qualify for debt relief. As a large share of Haiti’s debt is extended with concessional terms, the data in Figure A.22 overstate the actual level of debt, which is much lower when measured in net present value. Haiti has not reached the HIPC decision point and hence has not received debt relief as yet. Debt relief under the HIPC initiative and MDRI is likely to substantially reduce the country’s external public debt.
| Honduras |
Honduras is part of the HIPC initiative, and its main source of external financing is official creditors. Over the period under study, the country’s official debt averaged more than 90 percent of total debt and, since 1995, official creditors have financed virtually all of Honduras’s external debt (Figure A.23). Throughout the 1980s, external debt in Honduras grew steadily (going from US$1 billion in 1980 to US$2.6 billion in 1989) but remained below 60 percent of GDP. In 1990 an increase in the dollar value of debt (which rose to approximately US$3 million), together with a large devaluation which halved the dollar value of GDP, brought external debt to about 100 percent of GDP. The country’s external debt-to-GDP ratio continued to increase in the next few years, reaching 120 percent of GDP in 1994. The external debt-to-GDP ratio started decreasing in the mid-1990s and stabilized at about 70 percent of GDP in the 2000–2004 period. The country’s debt ratios are expected to decrease further thanks to debt relief provided through the MDRI.
Honduras’s total debt has followed a pattern similar to that of external debt (Figure A.24). Its domestic debt increased from 13 percent of GDP in 1980 to 27 percent in 1989. It then decreased over the 1990–1995 period (reaching a minimum of 9 percent of GDP) and subsequently increased again (partly substituting for external debt), reaching 17 percent of GDP in 2004. Most of Honduras’s domestic debt is denominated in domestic currency, but there have been some foreign currency issuances in the last few years. In the late 1990s, Honduras’s central bank started accumulating larger reserves, and by 2004, those reserves had reached 25 percent of GDP. As a consequence, Honduras’s net debt (which until recently was almost identical to its gross debt) is substantially smaller than its gross debt (in 2004, they were 60 and 85 percent of GDP, respectively).
| Jamaica |
Total external debt in Jamaica increased substantially over the course of the 1980s, going from US$1.8 billion (66 percent of GDP) in 1980 to about US$4 billion (more than 150 percent of GDP) in the late 1980s (Figure A.25). This increase was mostly financed by official lenders, with bilateral creditors playing a major role; over this period, the country’s bilateral debt rose from 22 percent of GDP to 80 percent, its multilateral debt increased from 10 percent of GDP to 34 percent, and its IMF debt went from 11 percent of GDP to 31 percent. The dollar value of Jamaica’s external debt decreased steadily over the 1990–1999 period and this, together with GDP growth, substantially reduced the country’s external debt-to-GDP ratio. However, Jamaica’s external debt started increasing again over the 2000–2004 period, with an increasing share of bonded debt (going from 6 percent of GDP in 1999 to 27 percent of GDP in 2004) and a smaller share of official debt (from 33 percent of GDP in 1999 to 26 percent of GDP in 2004).
During the 1980s, Jamaica’s debt-to-GDP ratio was above 100 percent, reaching a peak of 218 percent in 1985 (Figure A.26). It then decreased over 1986–1994, reaching a minimum of 72 percent of GDP in 1994, and subsequently increased again over the 1994–2004 period, returning to figures over 100 percent of GDP after 2001 (by 2004, the country’s total debt was about 140 percent of GDP).
During the early part of the 1980s, Jamaica’s domestic debt remained at about 50 percent of GDP, but then it started decreasing along with external debt, reaching 10 percent of GDP in 1991. Starting in the mid-1990s, Jamaica’s domestic debt increased steadily, and by the late 1990s, it had become larger than the country’s external debt (in 2004, domestic debt was 84 percent of GDP and 59 percent of total debt).9 Domestic debt in Jamaica is mainly issued in domestic currency, but the share of foreign currency debt has increased over the last few years (reaching 24 percent of domestic debt in 2003).
Jamaica’s central bank holds large international reserves, and once these reserves are netted out, the country’s debt-to-GDP ratio drops substantially.
| Mexico |
Mexico’s total external debt increased substantially after the country’s debt and currency crisis in 1982 (Figure A.27). Its dollar value increased by more than 40 percent (from US$58 billion to more than US$80 billion) over the 1982–1987 period and almost doubled in terms of GDP (going from 34 to more than 50 percent of GDP). The dollar value of the country’s external debt stabilized in 1987, and the external debt-to-GDP ratio started decreasing and fell below 20 percent of GDP in 1993 (Mexico was in default between 1982 and 1990; it exited default with the Brady swap, which led to a reduction of its bank debt and an increase in its bonded debt). The currency crisis that hit the country at the end of 1994 led to another sudden jump both in the dollar value of debt and in the external debt-to-GDP ratio (this time, the ratio doubled in one year, reaching 41 percent at the end of 1995). The IMF and other multilateral and bilateral lenders provided substantial financing at this point (by 1995, official creditors held more than one-third of Mexico’s external debt). The country’s external debt then decreased over the 1996–2001 period and subsequently stabilized at around 10 percent of GDP, with a much smaller component owed to official creditors.
Mexico’s domestic debt increased in the 1980s, but over the 1990–1994 period, its domestic debt dropped both in absolute terms and as a share of total debt; after 1995, however, the country’s domestic debt started increasing in both absolute and relative terms, reaching about 62 percent of total debt in 2004 (Figure A.28). In fact, the large drop in external debt in the first half of the 1990s was partly compensated for by larger issuances of domestic debt. Traditionally, domestic debt in Mexico has been denominated in domestic currency, with the exception of 1994, when the Mexican government issued a large amount of foreign currency short-term domestic debt (the (in)famous Tesobonos). Although most of the country’s debt is denominated in domestic currency, the share of that debt attributable to long-term nominal debt was basically nil until the late 1990s (Figure A.29). In 2004 more than one-third of domestic bonds issued by the central government were indexed to the interest rate, and another third were either short term or indexed to prices.
It is worth noting that the Mexican central bank holds large levels of international reserves, and if these reserves are subtracted from gross debt, the 2004 debt-to-GDP ratio drops from 38 percent to 29 percent of GDP.
Methodological issues. The Mexican authorities track two types of debt: “traditional” debt and “augmented” debt. Traditional debt, according to the authorities’ definition, includes only debt issued by the federal government. Augmented debt includes the debt of the agency that rescued the banking system after the Tequila crisis (FOBAPROA), which later became a deposit guarantee agency (IPAB), the debt of a trust fund created to rescue toll roads (FARAC), publicly guaranteed debt issued by private companies that are developing public infrastructure projects (PIDIRIEGAS), and debt issued by national development banks. This report uses an intermediate definition that includes the debt of FOBAPROA/IPAB and FARAC but not of PIDIRIEGAS and national development banks (for details on how these different definitions of debt compare, see Cowan et al., 2006).
| Nicaragua |
Nicaragua has a high debt ratio and is part of the HIPC initiative. In 1980 Nicaragua’s external debt was about US$2 billion (about 130 percent of GDP). It grew steadily over the 1980s, reaching US$8 billion in 1988 (corresponding to 800 percent of GDP) and more than US$9 billion in 1989 (1,025 percent of GDP) (Figure A.30). External debt remained above 500 percent for the next four years. In 1994, Nicaragua’s external debt-to-GDP ratio started decreasing, reaching 120 percent of GDP in 2004.
During the early 1990s Nicaragua had some debt with foreign banks, but since 1995 the totality of Nicaragua’s external debt has been issued by official creditors (with bilateral debt playing an extremely important role). Domestic public debt was basically nonexistent in the country until 1991, but thereafter it grew from 5.7 percent of GDP (1 percent of total debt) to 54 percent of GDP (30 percent of total debt) in 2004. All of Nicaragua’s domestic debt is in domestic currency. Two important components of the country’s domestic debt are the long-term bonds that were issued to compensate for the confiscations and expropriations that took place in the 1980s and central bank instruments issued for monetary purposes. The country’s debt is expected to decrease further, thanks to debt relief provided through the MDRI.
| Panama |
Over the 1990s the dollar value of Panama’s external debt remained more or less constant (Figure A.31), and its external debt-to-GDP ratio dropped from 120 percent of GDP (in 1990) to around 70 percent of GDP (in 1995), then remained more or less stable, oscillating between 64 and 72 percent of GDP.10 Most of the reduction in the external debt-to-GDP ratio was due to GDP growth and a drop in official debt (both its bilateral and multilateral components). The Brady exchange led to a reduction in external debt and a switch from bank loans to bonded debt (which went from 5 percent of GDP in 1995 to 38 percent in 1996). Domestic debt remained constant at about 20 percent of GDP. Hence, its relative importance grew with the decline of external debt. In particular, the share of domestic debt in total debt went from 14 percent in 1990 to 28 percent in 2004.
The National Bank of Panama (Banco Nacional de Panamá) holds a substantial amount of reserves and government bonds; when these assets are netted from total debt, the debt-to-GDP ratio drops by more than 10 percentage points (up to 20 percentage points in certain years).
The official currency of Panama is the U.S. dollar, and hence the differentiation between domestic and foreign currency debt is meaningless.
| Paraguay |
Over the 1980s Paraguay’s external debt increased from 15 to 41 percent of GDP (Figure A.32). After 1989, the dollar value of the country’s external debt started decreasing, and the external debt-to-GDP ratio reached a low of 14 percent in 1996. In 1997, Paraguay’s external debt started increasing again, reaching 34 percent of GDP in 2004 (Paraguay was in default between 1986 and 1992).
Paraguay’s external debt is almost completely held by official creditors (there was some borrowing from foreign banks in the late 1980s) and evenly distributed between multilateral and bilateral creditors. Domestic financing became progressively more important starting in the 1990s, increasing from 3 percent of GDP (10 percent of total debt) in 1990 to 8 percent of GDP (20 percent of total debt) in 2004.
Paraguay’s central bank holds large international reserves. In 2004 these reserves were about 16 percent of GDP, yielding a net debt of 26 percent of GDP (versus a gross debt of 42 percent of GDP).
| Peru |
Peru’s external debt increased from about US$5 billion (30 percent of GDP) in 1980 to about US$20 billion (more than 70 percent of GDP) in the early 1990s (Figure A.33). The two major creditors were bilateral lenders and foreign banks, followed by multilateral banks and the IMF. Between 1993 and 1996, the dollar value of Peru’s external debt was still increasing, but not as fast as the dollar value of GDP, leading to a reduction in the external debt-to-GDP ratio from 66 percent to 47 percent (Figure A.34). This ratio then dropped to 33 percent after the Brady swap (implemented in March 1997). Over the late 1990s, the dollar value of the country’s external debt remained more or less constant, but it started increasing again in the 2003–2004 period. However, the external debt-to-GDP ratio did not change much and, starting in 1997, oscillated between 33 and 39 percent without any clear trend.11 Over the 1997–2004 period the composition of the country’s debt did not vary significantly, with official debt financing around 75 percent of external debt and bonds the remaining 25 percent. In 2005 Peru’s external debt stock decreased by more than US$2 billion, mainly as a result of the prepayment of debt operations with Paris Club and suppliers. In both cases, the payment operations were financed with issues of domestic and external sovereign bonds, which allowed a change in the country’s debt structure, reducing external debt and increasing domestic debt from 21 percent of total public debt in 2004 to 25 percent in 2005.
Domestic debt was low in the early 1990s but grew in the second half of the decade, stabilizing at about 16 percent of GDP and 25 percent of total debt.12 About one-quarter of Peru’s existing domestic debt was issued in foreign currency, and the remaining 75 percent in domestic currency.
Peru’s central bank has accumulated large reserves (up to 20 percent of GDP), yielding a substantial difference between gross and net debt. In 2004, the country’s gross debt was 46 percent of GDP and its net debt 28 percent of GDP.
| Suriname |
Until the beginning of the 1980s, Suriname’s public debt was extremely low, but it grew—reflecting large deficits—from about 30 percent of GDP in 1983 to more than 100 percent of GDP in the early 1990s.13 Most of this debt was domestic, with the bulk held by the central bank. This high level of central bank financing translates into money creation and high inflation. Suriname’s public debt started decreasing in the early 1990s, reaching a minimum of 28 percent of GDP in 1997 (20 percent of GDP owed to external creditors and 8 percent owed to domestic creditors). However, the country’s public debt started increasing again in the late 1990s, reaching about 75 percent of GDP in 2000.14 A fiscal adjustment reversed this trend, and by 2004 Suriname’s total public debt stood at about 47 percent of GDP (of which 33 percent of GDP was owed to external creditors).
| Trinidad and Tobago |
In 1980 Trinidad and Tobago was characterized by low levels of debt (about US$100 million), but over the subsequent decade, the country’s external debt increased rapidly, reaching US$1.8 billion by 1989 (Figure A.35). In terms of GDP, total public debt increased from 6 percent of GDP in 1980 to almost 60 percent in 1990 and reached a peak of 67 percent in 1993 (Trinidad and Tobago was in default between 1988 and 1989). The main drivers of this increase in debt were a devaluation and an economic crisis which led to a 35 percent reduction in the dollar value of GDP. Starting in 1993, the country’s total debt began to decrease gradually, reaching 25 percent of GDP in 2004.
Trinidad and Tobago’s increase in debt over the 1984–1993 period was financed by issuing both domestic and external debt (unlike other countries in the region, Trinidad and Tobago did not make exclusive use of foreign bank loans, as it was already issuing a large amount of international bonds in the 1980s), with official debt growing rapidly over the 1986–1995 period. The decrease in the country’s total debt after 1993 was instead due to the behavior of external debt, which decreased from 44 percent of GDP in 1993 to 12 percent of GDP in 2004 (the largest decrease was in official debt, especially bilateral debt, and foreign bank loans). Domestic debt also decreased (going from 20 percent of GDP in 1993 to 13 percent of GDP in 2004), but at a much slower pace.
Since the mid-1990s, Trinidad and Tobago’s central bank has accumulated substantial reserves which, in 2004, were larger than the country’s total gross debt (yielding a negative net debt).
Methodological issues. Assembling data for Trinidad and Tobago was a difficult task, because central bank statistics do not include information on the composition of external debt. Hence, the data were obtained by mixing information from IMF reports, GDF, and the central bank. GDF was the main source of data for the 1980–1993 period. As GDF data did not match well with data from other sources, pre-1993 data should be viewed with caution. Domestic debt data were obtained from central bank statistics, and it is worth noting that these data do not always match the figures presented in IMF reports.
| Uruguay |
Uruguay’s external debt stood at about US$650 million in 1980 (about 9 percent of GDP) and jumped to more than US$2 billion in 1983 (almost 50 percent of GDP). The increase in the external debt-to-GDP ratio was triggered both by an increase in the dollar value of debt (Figure A.36) and also by an economic crisis and a real devaluation which reduced the dollar value of GDP by more than 50 percent over the 1981–1985 period. During this period, Uruguay’s main creditors were international banks, followed by multilateral banks and the IMF. Between 1985 and 1991, the dollar value of the country’s external debt did not change substantially, and economic growth led to a gradual decrease in the external debt-to-GDP ratio, which reached 21 percent of GDP in 1991 (in 1992, Uruguay swapped its bank debt for bonds, whose share of GDP then went from 0 to 6 percent). Over the 1992–2001 period, Uruguay’s external debt increased gradually, rising from about US$3 billion to US$6.5 billion.
The Argentine crisis of 2001–2002 had substantial spillovers in Uruguay, which faced both an increase in the dollar value of its external debt (which reached US$9 billion in 2002) and also a large real devaluation, which led to a sudden jump in the external debt-to-GDP ratio (to 71 percent in 2002 and then to 91 percent in 2003) (Figure A.37). The IMF and multilateral banks played an important role in financing this increase in debt (Uruguay’s IMF borrowing went from 1 percent of GDP in 2001 to 15 percent of GDP in 2002; debt held by multilateral lenders went from 11 percent of GDP to 22 percent of GDP over the same period). The ratio of bonded debt to GDP also increased substantially (going from 19 percent in 2001 to 31 percent in 2002).15
The country’s domestic debt increased substantially during the first half of the 1980s, increasing from 6 percent of GDP in 1980 to 27 percent of GDP in 1985, and remained stable throughout the rest of the decade, averaging 24 percent of GDP. It then decreased in the first half of the 1990s (reaching a low of 16 percent of GDP in 1997). After 1997, Uruguay’s domestic debt started increasing again, along with the country’s total debt. This increase was at first gradual, but then both domestic and external debt soared suddenly beginning in 2002, reaching 30 percent of GDP in 2004 and pushing total debt to well above 100 percent of GDP (the debt-to-GDP ratio was 65 percent in 2001 and was close to 120 percent of GDP in 2004). This increase in the debt-to-GDP ratio was due to both an increase in the dollar value of total debt and a decrease in the dollar value of GDP brought about by a large currency depreciation.
In Uruguay, domestic debt has traditionally been denominated in foreign currency, with the share of domestic-currency-denominated debt oscillating between 5 and 30 percent. The sudden increase in debt documented above was accompanied by central bank accumulation of international reserves and holdings of government paper. By the end of 2004, these assets of Uruguay’s central bank were in excess of 30 percent of GDP, yielding a large difference between the country’s net and gross debt (in 2004, the latter was 88 percent of GDP).
Methodological issues. As Uruguay’s official figures classify external debt as debt held by nonresidents and not as debt issued in foreign jurisdictions, it was necessary to reclassify some of the figures provided by the Uruguayan authorities. This reclassification was conducted using central bank, GDF, and Bloomberg data.
| Venezuela |
Venezuela’s external debt increased during the 1980s, from about US$10 billion in 1980 (15 percent of GDP) to almost US$24 billion (59 percent of GDP) in 1989 (with large jumps in 1984 and 1986) (Figure A.38). Until 1989, about 80 percent of Venezuela’s external debt was owed to foreign banks (these loans were in default over the 1983–1990 period), but in 1990 the country’s bank loans were swapped for bonded debt and official debt (IMF and multilateral debt reached 10 percent of GDP). Over the 1990–1994 period, the dollar value of Venezuela’s external debt grew at different rates and, as a consequence, the country’s external debt-to-GDP ratio first decreased (dropping to 47 percent of GDP in 1992) and then increased again (to 53 percent of GDP in 1994) (Figure A.39). External debt—both in dollar value and as a share of GDP—decreased substantially over the 1994–2001 period, reaching a minimum of 18 percent of GDP in 2001 (bonded debt decreased from 36 percent of GDP in 1994 to 13 percent of GDP in 2001). External debt increased again in the 2001–2003 period, peaking at 29 percent of GDP in 2003, then decreased slightly, to 25 percent of GDP, in 2004.
Over the 1980–2000 period, domestic debt in Venezuela oscillated between 6 percent and 12 percent of GDP. Between 2001 and 2004, the country’s domestic debt remained above 10 percent of GDP, reaching a peak of 18 percent of GDP in 2003. In the mid-1990s, Venezuela’s domestic debt was evenly split between domestic currency debt and foreign currency debt, but the share of domestic currency debt has increased over the years, and by 2004, 96 percent of the country’s domestic debt was denominated in domestic currency.
Venezuela’s central bank holds a large amount of reserves (18 percent of GDP in 2003 and 17 percent of GDP in 2004), yielding substantial differences between the country’s gross and net debt figures. In 2003, gross debt was 47 percent of GDP and net debt 28 percent. The corresponding figures for 2004 were 39 percent and 22 percent, respectively.
Methodological issues. The figures included in this report do not include debt issued by the state-owned oil company, Petroleos de Venezuela SA, or the assets of Venezuela’s Special Petroleum Fund. In the case of external debt, there were large differences between data reported by GDF and those reported by the IMF and the ministry of finance. The latter sources were used whenever possible.
