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Debt-Equity Swaps in Chile

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  • Ffrench-Davis, Ricardo

Abstract

The analysis of debt-equity swaps operated in Chile since 1985 shows or suggests that: (1) In a debt-led recession the common belief that DFI net transfers are countercyclical tends to be wrong. (2) Roughly 70 percent of the discount of debt notes in international markets has been captured by the foreign investor. (3) In debt-led crises, domestic firms tend to be "under-priced" in foreign currency, thus reinforcing the "windfall gains" for swappers. (4) The economic rents captured by investor have contributed to create a supportive mood in the business community. (5) Debt-equity swaps has postponed capital service, but expected profit remittances are larger than the corresponding interest payment reduction. (6) Overall domestic capital formation has been low. Copyright 1990 by Oxford University Press.

Suggested Citation

  • Ffrench-Davis, Ricardo, 1990. "Debt-Equity Swaps in Chile," Cambridge Journal of Economics, Oxford University Press, vol. 14(1), pages 109-126, March.
  • Handle: RePEc:oup:cambje:v:14:y:1990:i:1:p:109-26
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    Cited by:

    1. Guillermo Le Fort & Carlos Budnevich, 1996. "Capital Account Regulations and Macroeconomic Policy: Two Latin American Experiences," Economics Working Paper Archive wp_162, Levy Economics Institute.
    2. Agosin, Manuel R., 1992. "Structural adjustment and foreign direct investment: the case of Chile," Sede de la CEPAL en Santiago (Estudios e Investigaciones) 33862, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    3. Nunnenkamp, Peter & Funke, Norbert & Schweickert, Rainer, 1992. "International capital flows: recent developments, major determinants, and the position of Brazil in worldwide competition for foreign capital," Kiel Working Papers 509, Kiel Institute for the World Economy (IfW).
    4. Edgardo Barandiarán & Leonardo Hernández, 1999. "Origins and Resolution of a Banking Crisis: Chile 1982-86," Working Papers Central Bank of Chile 57, Central Bank of Chile.
    5. Agarwal, Jamuna Prasad & Gubitz, Andrea & Nunnenkamp, Peter, 1991. "Foreign direct investment in developing countries: the case of Germany," Open Access Publications from Kiel Institute for the World Economy 423, Kiel Institute for the World Economy (IfW).
    6. Fabrizio Onida, 2004. "Crescita e vincolo esterno: quali strategie per promuovere stabilità macroeconomica, competitività e investimenti," KITeS Working Papers 157, KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy, revised Jul 2004.

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