Keys For the Adoption of an Effective Regime on Sovereign Debt Restructurings
Manuel F. Montes & Guillermo Wierzba
The South Centre & CEFID-AR
"The lack of an appropriate multilateral legal framework, allowing the utilization of a predictable and rapid mechanism to guide the restructuring of sovereign debt generates the proliferation of incentives that dramatically increase costs both for debtors and "good faith” creditors. The recent experience of Argentina demonstrates that it is possible for "vulture funds" to get rulings in excess of the legal and contractual framework. Over the past three decades, the changes that took place in global finance, combined with the political, institutional and legal reforms that have accompanied these processes, consolidated a set of new challenges for sovereign debt restructuring processes. The improvements in debt contracts provisions do not fully resolve the problem. Furthermore, the establishment of a statutory mechanism that ensures a set of conditions that should be respected by all countries subscribing the agreement would be necessary even for such clauses to be effective."
Manuel F. Montes is Senior Advisor for Finance and Development at The South Centre.
Guillermo Wierzba is Director of CEFID-AR.