Posting has been erratic today because I’ve been at the Latin American Borrowers’
and Investors’ Forum
in midtown. While I was there, I was very happy to bump into an old friend:
Carlos Steneri, the director of Uruguay’s public debt management
unit. Steneri is a classic behind-the-scenes technocrat, who deserves vast amounts
of the credit that usually accrues to investment bankers and other flashier
individuals.
Steneri got me caught up on what Uruguay’s been up to over the past year, and
it’s incredibly impressive: the country borrowed a total of $3 billion on the
international capital markets – that’s an eye-popping 15% of GDP –
and used it to pay down debt maturing in the short term, to finance its budget
deficit, and to wipe out at a stroke all of the money that the country owed
to the IMF, the World Bank, and the Inter-American Development Bank.
We’ve now reached the point at which the private sector can fund Uruguay much
more cheaply than the public sector: Uruguay was paying about 9.5% on its loans
from the World Bank and IDB, while it pays only about 7% on the dollar bonds
it issues. The debt wipe-out is good news for Uruguay, which no longer needs
to worry about IMF conditionality, but it’s bad news for the international financial
institutions: they need to lend money in order to survive, but who are they
going to lend to if even Uruguay can get much cheaper funding from the international
capital markets?
Steneri has been at this game for a very long time: he was not only instrumental
in Uruguay’s ground-breaking 2003 restructuring, but also in earlier restructuring
around 1991. He knows full well that the markets which seem so generous today
can close up overnight – and that in that case, he will need the IMF to
help out. He’s also quick to deflect praise for orchestrating Uruguay’s debt-management
operations: it wasn’t him, he says, it was the flood of global liquidity which
made all this possible. In fact, it’s a combination of both.
One of the reasons that Uruguay has proved so successful and resilient over
the years is the fact that it has a very sophisticated set of technocrats such
as Steneri, who are adept at doing the right thing no matter which political
party is in power. SAIS professor Riordan Roett, at the same
conference, noted this morning that across the region, leftist governments are
doing a very good job at insulating their finance ministries from political
pressure – you can see it in Uruguay, Chile, Brazil, even Peru. Would
that the same thing could happen in the US.