He appeared with Joseph Stiglitz at Columbia University to give a talk on the problems of sovereign debt and how not to avoid its pitfalls.
Martín Guzmán, former Minister of Economygave a talk at Columbia Universityon March 29, together with his renowned mentor, Joseph Stiglitz. The theme of the dissertation was sovereign debt and how to “not fall into its trap”. As reported in a statement, within the framework of the talk, the economists presented a series of solutions to avoid the problems generated by debt in the different economies of the world.
Guzman argued that one of the problems of this topic is in the complexity the composition of private creditors. That includes hedge fundswhich in many cases have conflicts of interest or earn money from non-payments and, therefore, a system that fails is convenient for them.
Referring to the case of Argentina, the former minister stated that “the dispute with the vulture funds exposed key flaws in ‘non-system’ crisis resolution sovereign debt”. And he assured that this was what led to the strengthening of collective action clauses that “were put to the test for the first time in the 2020 Argentine debt restructuring.”
For their part, both economists highlighted the role of International Monetary Fund (IMF) in the improving debt sustainability analysis practices and the review of interest rate policies to reinforce the debt dynamics in favor of economic and social development”.
For his part, stiglitz assured that “the Federal Reserve had a very wrong policy”. “Keeping interest rates low for a long time and raising them later will obviously cause a lot of problems everywhere,” she explained.
According to Guzman, the pandemic of Covid-19, the Russia-Ukraine conflict and the cclimate change, are factors that created a “disproportionate threat to many countries already affected by debt distress.” And he explained that, when lending money, the debt sustainability but that said analysis usually does not take into account climatic disturbances “such as cyclones or droughts, which could negatively affect” the reimbursement schedules.
Source: Ambito
