IDEAS home Printed from https://ideas.repec.org/a/pal/develp/v67y2024i3d10.1057_s41301-025-00435-9.html
   My bibliography  Save this article

Pro-cyclicality, Debt, and Privatizations, Contributions to Debt Sustainability Concept: Latin America Counterfactual Scenarios

Author

Listed:
  • Katiuska King

    (FLACSO - Ecuador)

  • Manuel David Cruz

    (Boston University)

Abstract

This article uses Latin America’s external debt problems in the 80s to show debt pro-cyclicality and how an alternative approach to its management could contribute to improving a quicker economic recovery, being counter-cyclical for rethinking the debt sustainability concept. The article constructs two counterfactual scenarios around the debt payments where countries buy back their own debt at discounted prices. The purchase of debt at lower prices was suggested to investors by the Washington Consensus to buy public assets and promote foreign direct investment. An early implementation of the Brady Plan (1989) solutions could have improved economic situations in these countries and solve debt problems earlier. What happened was possible because of structural power relations from Washington and some ruling groups in the countries. Debt sustainability should emphasize economic recovery as well as the possibility to use market operations with a multilateral space for debt restructuring and independent credit rating agency.

Suggested Citation

  • Katiuska King & Manuel David Cruz, 2024. "Pro-cyclicality, Debt, and Privatizations, Contributions to Debt Sustainability Concept: Latin America Counterfactual Scenarios," Development, Palgrave Macmillan;Society for International Deveopment, vol. 67(3), pages 357-369, December.
    • Handle: RePEc:pal:develp:v:67:y:2024:i:3:d:10.1057_s41301-025-00435-9
    DOI: 10.1057/s41301-025-00435-9
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1057/s41301-025-00435-9
    File Function: Abstract
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1057/s41301-025-00435-9?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Frankel, Jeffrey A. & Vegh, Carlos A. & Vuletin, Guillermo, 2013. "On graduation from fiscal procyclicality," Journal of Development Economics, Elsevier, vol. 100(1), pages 32-47.
    2. Eichengreen, Barry, 1990. "Trends and Cycles in Foreign Lending," CEPR Discussion Papers 451, C.E.P.R. Discussion Papers.
    3. Huixin Bi & Ms. Wenyi Shen & Ms. Susan S. Yang, 2014. "Fiscal Limits, External Debt, and Fiscal Policy in Developing Countries," IMF Working Papers 2014/049, International Monetary Fund.
    4. Ms. Elva Bova & Nathalie Carcenac & Ms. Martine Guerguil, 2014. "Fiscal Rules and the Procyclicality of Fiscal Policy in the Developing World," IMF Working Papers 2014/122, International Monetary Fund.
    5. repec:cdl:econwp:qt82z7083m is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Aygun Garayeva & Gulzar Tahirova, 2017. "Government Spending Effectiveness and the Quality of Fiscal Institutions," Business & Management Compass, University of Economics Varna, issue 2, pages 128-143.
    2. Pandey, Radhika & Patnaik, Ila, 2019. "Fiscal policy cyclicality in South Asian economies," Working Papers 19/268, National Institute of Public Finance and Policy.
    3. Combes, Jean-Louis & Minea, Alexandru & Sow, Moussé, 2017. "Is fiscal policy always counter- (pro-) cyclical? The role of public debt and fiscal rules," Economic Modelling, Elsevier, vol. 65(C), pages 138-146.
    4. Guerguil, Martine & Mandon, Pierre & Tapsoba, René, 2017. "Flexible fiscal rules and countercyclical fiscal policy," Journal of Macroeconomics, Elsevier, vol. 52(C), pages 189-220.
    5. M. K. Alabi & K. Amirthalingam, 2020. "Fiscal Policy and the Business Cycle in the West African Monetary Zone," Working Papers 8, Department of Economics, University of Ilorin.
    6. DUMITRESCU, Bogdan Andrei, 2015. "The Fiscal Framework In Romania – The Efficiency Of Fiscal Rules," Studii Financiare (Financial Studies), Centre of Financial and Monetary Research "Victor Slavescu", vol. 19(3), pages 91-106.
    7. Christoph Peatz, 2020. "Fiscal Rules in Good Times and Bad," IMK Working Paper 206-2020, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    8. Heimberger, Philipp, 2023. "The cyclical behaviour of fiscal policy: A meta-analysis," Economic Modelling, Elsevier, vol. 123(C).
    9. Kady Keita & Camelia Turcu, 2023. "Promoting Counter-Cyclical Fiscal Policy: Fiscal Rules Versus Institutions," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 65(4), pages 736-781, December.
    10. Ardanaz, Martín & Ulloa-Suárez, Carolina & Valencia, Oscar, 2024. "Why don't we follow the rules? Drivers of compliance with fiscal policy rules in emerging markets," Journal of International Money and Finance, Elsevier, vol. 142(C).
    11. Ardanaz, Martín & Cavallo, Eduardo & Izquierdo, Alejandro & Puig, Jorge, 2021. "Growth-friendly fiscal rules? Safeguarding public investment from budget cuts through fiscal rule design," Journal of International Money and Finance, Elsevier, vol. 111(C).
    12. Kady Keita & Camelia Turcu, 2019. "How to limit fiscal procyclicality: the role of exchange rate regimes, fiscal rules and institutions," Working Papers 2019.01, International Network for Economic Research - INFER.
    13. Arroyo Marioli, Francisco & Fatas, Antonio & Vasishtha, Garima, 2024. "Fiscal policy volatility and growth in emerging markets and developing economies," International Review of Economics & Finance, Elsevier, vol. 92(C), pages 758-777.
    14. Avellán, Leopoldo & Galindo, Arturo J. & Lotti, Giulia, 2022. "Following public finances: The mirage of MDBs countercyclicality," The Quarterly Review of Economics and Finance, Elsevier, vol. 84(C), pages 372-385.
    15. Sangita Misra & Rajiv Ranjan, 2018. "Fiscal rules and procyclicality: an empirical analysis," Indian Economic Review, Springer, vol. 53(1), pages 207-228, December.
    16. Bi, Huixin & Shen, Wenyi & Yang, Shu-Chun S., 2016. "Fiscal limits in developing countries: A DSGE Approach," Journal of Macroeconomics, Elsevier, vol. 49(C), pages 119-130.
    17. Ryota Nakatani, 2019. "A Possible Approach to Fiscal Rules in Small Islands — Incorporating Natural Disasters and Climate Change," IMF Working Papers 2019/186, International Monetary Fund.
    18. Gootjes, Bram & de Haan, Jakob, 2022. "Procyclicality of fiscal policy in European Union countries," Journal of International Money and Finance, Elsevier, vol. 120(C).
    19. E. Yu. Ablaev & T. R. Magzhanov, 2024. "Fiscal Rules and Countercyclical Fiscal Policy in Russia," Studies on Russian Economic Development, Springer, vol. 35(3), pages 337-346, June.
    20. Durand-Lasserve, Olivier & Karanfil, Fatih, 2023. "Fiscal policy in oil and gas-exporting economies: Good times, bad times and ugly times," Energy Economics, Elsevier, vol. 126(C).

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pal:develp:v:67:y:2024:i:3:d:10.1057_s41301-025-00435-9. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.palgrave-journals.com/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.