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Comment

In: World Trade: Monetary Order and Latin America

Author

Listed:
  • Alexander K. Swoboda

Abstract

The main focus of Professor Aliber’s chapter is the bargaining situation that lenders and borrowers find themselves in once a change in economic circumstances — say, an unexpected rise in interest rates, which is the example he emphasises most — has made a loan turn sour; that is, when the change in circumstances has reduced the borrower’s ability — or, more accurately and generally as Aliber emphasises, willingness — to repay. It is then in the interest of the borrower to ‘position’ lenders so that they are forced to capitalise part or all of scheduled interest payments lest the borrowers default outright. And it is in the interest of the lender to ‘position’ the borrowers so that they will choose to attempt to repay at least part of the loan; and this is achieved by reducing the cost of servicing the debt relative to the costs of repudiation and may therefore require a downward adjustment in the value of the debt.

Suggested Citation

  • Alexander K. Swoboda, 1990. "Comment," Palgrave Macmillan Books, in: Paolo Savona & George Sutija (ed.), World Trade: Monetary Order and Latin America, pages 154-159, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-349-08812-6_12
    DOI: 10.1007/978-1-349-08812-6_12
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