Public debt sustainability in the northern countries of Latin America

Igor Paunovic

Revista CEPAL, 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.

Date: 2005-12
Note: Includes bibliography
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:ecr:col070:11116

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