Public debt sustainability in the northern countries of Latin America

Paunovic, Igor

2014-01-02T18:44:06Z

LC/G.2287-P

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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.

Includes bibliography

FINANZAS LOCALES; INDICADORES ECONOMICOS; POLITICA FISCAL; PUBLIC DEBT; LOCAL FINANCE; FISCAL POLICY; ECONOMIC INDICATORS; ECONOMIC ANALYSIS; DEUDA PUBLICA; ANALISIS ECONOMICO;