Alicia Bárcena, Executive Secretary of ECLAC, believes that in the current pandemic, creditors and debtors should share the burden of debt.
The Economic Commission for Latin America and the Caribbean (ECLAC) stated that debt restructuring, renegotiations and relief during the current pandemic are matters of public and private interests.
?? We need to balance the competitive environment between creditors and debtors. The organization’s executive secretary, Mexican Alicia Barcena (Alicia Bárcena), said at the 2021 Financing for Development Forum held under the auspices of the United Nations Economic and Social Council that both should share responsibilities.
Heads of state, ministers and other government authorities as well as prominent experts from international organizations and representatives of civil society and the private sector participated in the meeting to promote dialogue on financing solutions for post-nineteenth-century recovery and sustainable development. Development by 2030.
Senior UN officials have strongly called for transparency in the rules and the establishment of a multilateral debt restructuring system, which can be avoided, especially in the current era, which is characterized by crises triggered by the 19-nation pandemic and exacerbated the difficult economic situation. Many countries, especially in Latin America and the Caribbean?
Bárcena added that the main obstacle for the private sector to participate in debt renegotiations and restructuring is the lack of a proper balance between public and private interests, which is why he emphasized that there is an urgent need for a level playing field.
He added: “It is necessary to ensure that the government and the private sector develop effective communication strategies to set common goals and expectations.”
She said that the head of the ECLAC also urged the establishment of a multilateral sovereign debt restructuring mechanism, which is closely related to the establishment of a multilateral credit rating agency, which can serve as a balancing force for the agency’s current oligopoly.
Look at what happened in Latin America and the Caribbean. According to Fitch’s ratings, the region has been downgraded 19 times by its sovereign credit rating. By 2021, even countries with solid economic foundations like Chile will have their credit ratings downgraded. Is this not understandable? We are in a pandemic! ??, he blurted out.
Alicia Bárcena uses four recent debt restructuring and renegotiation cases in the region as examples: Argentina (2020), Barbados (2018-2019), Grenada (2013-2015) and Ecuador (2020) ) And lists the lessons learned from these experiences.
First, he enumerated the above-mentioned environment that requires fair competition and shared the burden between creditors and debtors. For example, he went on to say that Ecuador and Granada managed to cut the original value of their bonds.
Second, ensure regular and effective communication strategies between the government and creditors. He explained: “They should set common goals and expectations and share data on a regular basis.”
Third, Bárcena emphasized that timing and speed are critical to the success of the debt restructuring and renegotiation plan.
Regarding the terms of the new financial instruments against the hurricane, he explained that these terms must be led by official creditors and then attract private creditors.
Similarly, the participation of creditors and their interests must also be consistent. This can be done through collective action clauses, which are essential for adjusting the private sector and streamlining processes. He added that Argentina and Barbados, Ecuador and Grenada have all included class action clauses in their debt negotiations.
He also emphasized that the support of international financial institutions is essential to facilitate debt renegotiation and restructuring, but this should not involve trade-offs between these measures and the government’s growth, employment and welfare goals.
?? (Debt) restructuring must be accompanied by innovative measures that should allow the development of new financing tools, such as hurricane clauses that link the country’s ability to pay and natural disaster risk. Similarly, income-linked bonds can take into account the constraints of the external sector, which is one of the main problems faced by many middle-income countries,” Alicia Bárcena concluded.