21983 Vol. 3 No.1 November 1995 FILE COPY CONTENTS AND SUMMARY INTERNATIONAL LENDING EQuITY PORTFOLIO AND AND CAPITAL MARKETS FOREIGN DIRECT INVESTMENT U DEVELOPING-COUNTRY * EMERGING STOCK MARKETS PAGE 9 BORROWING PAGE 4 The IFC's Global Composite Index fell 1.9% Developing countries raised $22.4 billion in in the third quarter, despite some increase bonds and loans in the second quarter of early in the quarter. Markets registered 1995, pushing the total for the first half of the strong growth in Brazil (12.2%), China year to $39.3 billion, 8% higher than in the (11.3%), the Republic of Korea (8.9%), and first half of 1994. Bond financing accounted Mexico (8.6%), but the most impressive for almost 55% of the total, evidence of the showing was the 42% rise in Nigerian equi- market's rapid recovery from the December ties. Political and economic troubles de- 1994 Mexican peso crisis. pressed markets in Malaysia, the Philippines, Sri Lanka, Thailand, and Turkey. * GLOBAL BORROWING PAGE 6 International markets expanded rapidly over * NEW EQUITIES AND the past six months, with $349 billion raised DERIVATIVES PAGE 1 1 during the third quarter, compared with International equity issues by emerging $258 billion in the first. Bond markets in- markets totaled $3.1 billion in the third creased in both the second and the third quarter, down from the $3.7 billion regis- quarters, while syndicated loans shot up 65% tered in the previous quarter. Asian firms in the second quarter before declining some- accounted for more than 70% of the total, what in the third quarter. whereas issues from Latin America contin- ued to be low. Returns on mutual funds in * COMMERCIAL BANK CLAIMS PAGE 6 emerging markets rose only marginally, and In the first quarter of 1995 net international only a handful of new funds were launched bank credit rose $190 billion, while cross- during the quarter. border claims of BIS reporting banks were $330 billion higher, exceeding the fourth- * FOREIGN DIRECT INVESTMENT quarter 1994 rise by 65%. Claims on devel- AND PRIVATIZATION PAGE 13 oping countries rose $12 billion. The growth The Republic of Korea took steps in October in developing-country deposits decelerated to slow foreign investment outflows. The somewhat in first-quarter 1995, increasing OECD began negotiations on a new multi- $15.6 billion, compared with a rise of $24.9 lateral agreement on investment. Revenues billion in the previous quarter. from privatization have continued to decline, with privatization through equity * MARKET CREDITWORTHINESS PAGE 8 issues decreasing significantly and direct Several countries received upgrades during sales maintaining the same pace as in previ- the third quarter. Moody's upgraded the for- ous years. eign currency debt of Trinidad and Tobago to Bal and that of Colombia to Baa3. IBCA gave the senior, unsecured debt of the Czech SECONDARY MAR KETS Republic an A- rating, the first A rating as- FOR DEVELOPING- signed by a major credit-rating agency to a COUNTRY DEBT PAGE 14 former Eastern bloc trading country. Ratings for Argentina and Turkey were affirmed. Increased buyback activity during the third Pakistan was the only country downgraded quarter caused a rise in the prices of during the quarter. developing-country debt. Argentina began 2 FINANCIAL FLOWS AND THE DEVELOPING COUNTRIES _C')NTENTS AND SUMMARY weekly auctions to buy back some of its COMMERCIAL BANK higher-yielding debt, and speculation about PROVISIONING AND possible buybacks by Brazil and Peru led to CAPITAL ADEQUACY PAGE 18 sharp increases in secondary-market prices. Viet Nam recently began negotiations with Major US banks showed a slight decline the London Club over commercial bank debt in their capital adequacy ratios during the in default. third quarter, while ratios for European banks showed some improvement. OFFICIAL FLOWS: MULTILATERAL AND BILATERAL FINANCIAL BRIEF: PORTFOLIO FLOWS * MULTILATERAL FLOWS PAGE 15 AFTER MEXICO PAGE 19 Lending bv the World Bank Group rose sig- nificantly in the fiscal year ending Juie 30, Participants at a rieceint World Bank semiinar 1995. Measures to increase resources to thc concluded that the Mexican peso crisis will IMF were a topic of discussion at the annual have little long-term impact on the demand Bank-Fund meetings. The IDB has inaugu- for emerging-market securities. _Z Lo8 rated a new program of partial risk and credit , guarantees to attract private lending for r. infrastructure. STATISTICAL APPENDIX co In a a 3 9 BILATERAL ODA AND U BANK AND TRADE-RELATED i a) EXPORT CREDITS PAGE 17 NONBANK CLAIMS PAGE 21 X0 i Japan announced that 1996 expenditures on N COMMERCIAL BANK CLAIMS official development assistance will be more ON DEVELOPING COUNTRIES PAGE 22 than 3% higher than the previous year, and the EXIM Bank of Japan provided loans to U COMMERCIAL BANK CLAIMS Papua New Guinea, Paraguay, and South ON DEVELOPING COUNTRIES, Africa for a variety of purposes. The US Ex- BY COUNTRY OF ORIGIN PAGE 23 Im Bank introduced a new exposure fee system. U MATURITIES OF BANK CLAIMS ON DEVELOPING COUNTRIES PAGE 27 ~~Z * FUNDS RAISED ON < DEBT RELIEF UPDATE INTERNATIONAL CAPITAL MARKETS PAGE 28 - * OFFICIAL CREDITORS PAGE 17 N SECONDARY MARKET DEBT . _ 0 The Paris Club reached two agreements dur- (BID) PRICES PAGE 29 L 0 O ing the third quarter, with Algeria and with PG 3 -: a EMERGING STOCK MARKETS PAGE 30 2 1l the former Yugoslav republic of Macedonia. o a) z * FDI FLOWS PAGE 31 t * COMMERCIAL CREDITORS PAGE 17 According to the recently released term U COUNTRY GROUPS PAGE 32 sheet for Panama's Brady-style restructuring, Panama will exchange about $2 billion of commercial bank debt and related interest Tables on external debt and aggregate long-term arrears for new instruments, under options resource flows are published only as data are to be chosen by each creditor. updated., usually once a year in February. NOVEMBER 1 995 3 INTERNATIONAL LENDING AND CAPITAL MARKETS DEVELOPING-COUNTRY TABLE 2 BORROWING BOND ISSUES BY TYPE OF BORROWER M DEVELOPING COUNTRIES RAISE $22.4 US$ miliions BILLION IN MEDIUM- AND LONG-TERM DEBT 1993 1994 Q2 Q3 According to the Organization for Economic All developing countries 55,201 50,129 12,813 20,911 Cooperation and Development, developig . Privrte 18,304 21,010 5,166 6,998 Cooperation and Development, developing Sub-Saharan Africa 0 75 0 0 countries raised $22.4 billion through inter- East Asia and Pacific 4,547 8,604 2,687 4,564 national bond and loan markets in the sec- South Asia 556 636 0 250 Europe and Central Asia 354 1.598 0 37 ond quarter of 1995, pushing the total for the Latin America and Caribbean 13,845 10,097 2,479 2,147 first half of the year to $39.3 billion, 8% Middle East and North Africa 0 0 0 0 higher than in the firsthalfof 1994. The total Sovereign 19,904 17,156 5,479 8923 Sub-Saharan Africa 0 1,520 346 150 for the quarter reflected Latin America's East Asa and Pacific 907 2,399 0 175 strong recovery from the Mexican peso crisis, South Asia 0 ISO 0 0 Europe and Central Asia 15,115 9,1IS 3,038 3 266 as funds raised by the region on the bond and Latin America and Caribbean 3,882 3,572 1,922 4 879 loan markets rebounded in the second quar- Middle East and North Africa 0 400 174 454 ter to $6.1 billion, from just $995 million in Other public 15,994 1 1,963 2,168 4,990 Sub-Saharan Africa 0 0 0 0 the first quarter. Nevertheless, at $8 billion, EastAsiaandPacific 8,156 6,599 J,160 3.425 East and South Asian countries had the high- South Asia 0 300 0 262 vEurope and Central Asia 928 1,.062 0 347 est voumeofborrowing in the second quar- Latin America and Caribbean 6,910 4,003 1,008 906 ter. Borrowing by Eastern Europe and Middle East and North Africa 0 0 0 50 Central Asia reached $5.8 billion, whereas it Source: Furomoncy Bondwarc and World Bank. fell for Sub-Saharan Africa to $594 million from $906 million in the previous quarter. The increase reflected heavy reliance on While in the first quarter bond financing ac- bonds by a few large borrowers including counted for 35% of the total, during the sec- Brazil, Hungary, and the Republic of Korea. ond quarter it outstripped bank credit, reaching almost 55% of the total (table 1). . BOND ISSUES GAIN MOMENTUM New bond issues by developing countries rose TAB¢LE 1 in value for the second consecutive quarter, INTERNATIONAL BORROWING BY SELECTED DEVELOPING reaching $20.9 billion in the third quarter COUNTRIES and surpassing the average quarterlv issue in US$ millions s 1993 1994 1995QI r995Q2 1994 (table 2 and figure 1). The increase was Totol Bonds Totol Bonds Total Bonds Totol Bonds attributable to improved confidence in devel- Argentira 6,473.2 6,097.2 5,715.8 4,587.9 405.0 0 1,505.0 350.0 oping countries' securities and to declining Brazil 6,449.4 6,120.4 4,01 .4 3,960.0 158.0 158.0 1 7961 1,695.1 yields in industrial country markets. The Chile 774.6 432.6 80.0 0 245.0 75 0 450 0 90.0 China 6.7560 2,956.8 8,157.2 3,802.5 1,581.6 173.6 1,0414 173.6 bond market has recovered rapidly from the Czech Republica 9026 702.6 637.9 400.0 250 0 1500 0 December 1994 Mexican peso crisis. Total Hungary 5,0707 4,808.5 2,541.1 1,721.0 252.3 252.3 891.5 711.5 India 475.0 445.0 1,461.4 863.4 644.0 0 750 0 sovereign issues increased $3.4 billion in the Indonesia 3,726.0 1,725.9 6,223.7 2,194.0 1,439.5 40.0 1 667.5 40.0 third quarter, with much of the growth due to Korea, Rep of 7,7188 5,646.2 7,908.4 3,424.0 3,231.3 2,312.2 3,354.1 2,077.1 the more than ofLatin American is- Malaysia 1,611 1 0 4.126.0 1,6 5.0 0 0 0 0 doubling Mexico 9,751.5 9,351.4 8,525.5 6,515.6 [37.0 137.0 276.5 206.5 sues. Mexico borrowed $2.2 billion-$l bil- Pak stan 92.3 92.3 195.0 195.0 409.2 0 261.6 0 lion in two-year floatira notes at a spread Poland 0 0 2.8 0 0 0 42.0 0 Thailand 5,5504 2,166.5 8,060.2 3,327.7 1,781.0 100.0 1,433.6 185.0 of 538 basis points (compared with 208 basis Turkey 5,762.7 3,858.8 960.9 719.8 0 0 755.0 255.0 Venezuela 2,931.3 2,142.9 400.0 0 0 0 0 0 posts for a major issue in early 1993) and a Zimbabwe 90.0 0 0 0 0 0 0 0 three-year, $1.2 billion yen-denominated Note: Bonds include both intemational issues (euromarkets) and traditional foreign issues. issue. Despitc a 13% decline from Latin Amer- a. Data before April 1993 refer to Czechoslovakia. Source: OECD, Finoncial Strtrstics (monthly), July 1 995. ican countries, private issues were up about 4 FINANCIAL FLOWS AND THE DEVELOPING COUNTRIES IN-ERNATIONAL. ILENDING AND CAPITAL MARKETS 35% from the previous quarter, reflecting FIGURE I continued strong growth of issues from Asian BOND ISSUES FROM DEVELOPING countries. Nonsovereign public borrowing COUNTRIES, BY MATURITY also increased notably, more than doubling US$ billions from the second quarter, with Asian countries 50. accounting for about 69% of the total. U Over 15 years Asian bonds, at $8.7 billion, accounted for 1I Il-1S years 41 % of the total value of bonds issued by de- 6 i-s years veloping countries. The Republic of Korea i ye_ topped the Asian bond league table, fol- 20.9 lowed by Malaysia and Thailand. China was also in the market-as was India, after being 12.8 absent from the market since 1994. Issues from Asia tended to be longer term than those from Latin America, averaging about 1994 1995Q2 1995Q3 five years. Hungary was the most active issuer Source Euromoney Bondware and Word Banks in Eastern Europe, with the National Bank of Hungary raising $617 million. Russia's ____ Lukoil raised $347 million. The Republic of FIGURE 2 Turkey tapped the market for $1.5 billion BOND ISSUES FROM DEVELOPING after being out of the market for a year. And COUNTRIESl BY TYPE FIGUREN3 the government of Lebanon offered a five- COMPOSITION OF year eurobond issue for $300 million with a 50.1 BOND ISSUES, 1 995Q3 spread of 320 basis points over US Trea- U Floating-rate suries, slightly lower than the 325 basis points .:. , Convertible East and South Asia for the 1994 issues. l Fixed-rate ($8.2 billion) Sw F t BORROWERS OFFER MORE FIXED-RATE 20.9 1% Yen 19% AND YEN-DENOMINATED SECURITIES 12.8 Fixed-rate securities continued to gain mar- 'l US dollars ket share in the third quarter, increasing to __% 71% of bonds issued by developing coun- l994 1995Q2 1995Q3 tries, from 63% in the second quarter (figure Source Euromoney Bondware and World Bank. Latin America ($7.9 billion) Other 2). Although dollar-denominated securities 5% DM still account for the bulk of bond issues, yen- 2___ __ __ ___ o50o denominated securities have increased no- FIGURE4 4_ tably, perhaps owing to reduced concern SECTORAL BREAKDOWN OF /en about future appreciation of the yen. They DEVELOPING-COUNTRY BOND ISSUES, 30% accounted for 30% of the bond volume in Latin America and 71% in Europe and Cen- Boinengfincnce 37% Mningmol 8% Asia ($3d7 billion) tral Asia (figure 3). The yen-denominated se- Other 4% US dollars curities tended to be issued by governments Oh 8% DM 10% or state-controlled entities rather than pri- -Oter vate companies, accommodating Japanese Government 42% investors' preference for the greater security \ Yn71 provided by public sector debt securities. Pri- Note tOther' incudes Utr es, agrgcu tuee, constructcon. transpot, and other vate issues from Latin America were manly sevNices. Source:hEuroneoneyeBondwamrandnWodd i urce. SourcenEuromoney Bondware and World k from banks (figure 4) and had short maturi- sro-e o an a Nov MBER 1 995 5 INTERNAT iONAL LENDING AND CAPITAL MARKETS ties averaging about two years. Brazilian Japanese investors for yen-denominated as- banks rushed into the market to beat imple- sets, a few large issues made the yen a heavily mentation of the new 5% tax on bonds, com- used currency. mercial paper, and international loans designed to curtail capital inflows. Issues * SYNDICATED LOANS INCREASE IN SECOND from Asia tended to be longer term and were QUARTER, RETREAT IN THIRD QUARTER denominated mainly in US dollars. The syndicated loan market surged during the second quarter, up $113.2 billion (65%) over the previous quarter. During the third GLOBAL BORROWING quarter new syndicated loans were down $82.8 billion but nevertheless remained *1 BOND BORROWING UP IN SECOND AND above the quarterly levels seen in 1994. The THIRD QUARTERS share of syndicated loans in total financing According to the OECD, $315.3 billion was fell from 36% in the second quarter and to raised in international markets in the second 24% in the third. Strong competition among quarter of 1995 (table 3). The 22% increase lenders has reduced spreads in the syndicated over the previous quarter was due to a some- loan market, attracting large borrowers. what calmer exchange rate and interest rate Banks' core capital has increased substan- environment and some financial recovery in tially in recent years in North America and Latin American countries. International Europe and now generally exceeds by a com- markets continued to be buoyant in the third fortable margin the minimum required quarter, when $349.4 billion was raised. under the Basle Capital Accord. Although the Bond borrowing rebounded from the first- higher core capital levels could permit ex- quarter decline: gross bond issues reached pansion in the banks' assets, recent official $111.9 billion in the second quarter and in- warnings about the risks of reverting to the creased 15% to $128.2 billion in the third excessively loose credit standards of the late quarter. As interest rates in industrial coun- 1980s have made some lenders cautious. tries stabilized, fixed-rate bonds continued to account for the bulk of international issues. Issues were concentrated in US dollars, yen, CO MM E RC IAL BANK CLAIMS and German marks. Reflecting continued strong demand by both Japanese and non- U BANKS' CROSS-BORDER CLAIMS AND NET CREDIT CONTINUE TO EXPAND Cross-border and local foreign currency TABLE 3 INTERNATIONAL CAPITAL MARKET claims of BIS reporting banks increased FLOWS $330.3 billion in the first quarter of 1995, U5S billins after rising $199.4 billion in the fourth quar- lnst rument 1 993 1994 1 995Q2 1 995Q3 nstr Iuent 199 1994 9929953 ter of 1994. Causing the increase were re- Bonds 481.0 426.9 111.9 128.2 Equity 40.7 44.9 E. 1 9.6 liance on the international banks to channel Syndicated oans 136.7 202.7 1 3.2 82.8 funds fromJapan to other financial centers, NIFI and other back-up facilities 8.2 4.9 0.1 2.2 sizable cross-border lending in scveral of the ECPL and other non- European currencies facing downward pres- underwritten facilities 152.0 274.0 82.0 126.6 sure, and buoyant lending to Asian coun- Total 818.6 953.4 315.3 349.4 tries. Net international bank credit (new F ows to developing lending) increased $190 billion in the first countriesc (percent) 9.2 9.4 a. Note issuance facilities. quarter of 1995, following a $25 billion in- b. Eurocommercial paper. creasc in the fourth quarter of 1994. Lending c. Including Eastern European countries. Source: OECD, FinandalMarket Trends, to Asia remained strong, with almost two- 6 FINANCIAL FLOWS AND THE DEVELOPING COUNTRIES INTIRNACTN N.'JV L EILDSNC. ANcD CAPiTAL MARKETS thirds of the region's new loans extended by $101 million, and lending to Brazil rose $26 banks in Hong Kong and Singapore. Lend- million as US banks continued to provide ing in yen accounted for 23% of the increase financing. in the cross-border claims of banks in indus- Claims on Eastern Europe and the former trial reporting countries (significantly more Soviet states increased $0.3 billion, following if positions in offshore centers are included), two quarters of retreat owing to the debt re- and the yen replaced the deutsche mark as duction agreement with Poland and trans- the second most important currency of de- fers of guaranteed loans to official agencies. nomination in international bank lending Claims on the Czech and Slovak Republics after the US dollar. Despite the strength of registered the only significant increase ($0.8 dollar business in recent quarters, the dol- billion) in the region, caused by short-term lar's importance in international bank fi- borrowing by local companies. Elsewhere, nancing has declined steadily over the years, claims on Middle Eastern countries fell $1.1 and the currency now accounts for 42% of billion and on African countries $1.5 billion. the international assets of banks in industrial The overall increase in claims on develop- reporting countries. ing countries was accompanied by an in- crease in their deposits of $15.6 billion in the U BANKS' EXPOSURE IN DEVELOPING first quarter, compared with an increase of COUNTRIES RISES $24.9 billion in the previous quarter. Resi- Banks' outstanding claims (not adjusted for dents of the Middle East accounted for $11.8 exchange rate changes and including Eastern billion of the first-quarter increase, with the Europe and the former Soviet states) rose $7.5 billion rise in deposits by Saudi Arabia $12.1 billion in the first quarter of 1995, fol- possibly reflecting a shift in the country's for- lowing increases of $15.6 billion in the fourth eign exchange reserves out of dollar paper quarter and $40.8 billion for all of 1994. Lend- (which is not included in the reported fig- ing to Asia remained buoyant, owing to both ures) into deposits denominated in curren- short-term interbank credit lines to exploit in- cies appreciating against the dollar. In Israel terest rate differentials between domestic and high domestic interest rates led residents to international markets (for example, in Thai- liquidate $1.7 billion of foreign currency de- land) and Asian borrowers' continued heavy posits with reporting countries. Deposits reliance on bank loans rather than securities. from Asia rose $1.6 billion, reflecting in- The high-growth Asian countries posted a creased deposits by residents of India ($2.9 $17.9 billion increase, with credits to the Re- billion) and Thailand ($1.2 billion) balanced public of Korea rising $7.3 billion and to Thai- by a fall in deposits by Chinese residents ($1.1 land $6 billion. China, Indonesia, and billion) and continued withdrawals by Malaysia also registered increases. Credit to Malaysian residents ($2.2 billion). Deposits India fell $197 million, mainly as a result of from Eastern Europe and the former Soviet the new restrictions imposed on foreign cur- states increased $1.0 billion, and deposits rency business by residents. from African countries rose $0.3 billion. Claims on Latin America fell $3.5 billion, reflecting the impact of the Mexican peso cri- * PROJECT FINANCE JUMPS IN THIRD sis. A wide range of internationally active QUARTER banks did not renew maturing claims on Project finance on a commitment basis in- Mexico, leading to a fall in claims on that creased in the third quarter to $8.8 billion, country of $2.5 billion, more than 70% of the about equal to the amount for the entire first total decline for the region. Lending to Chile half of 1995 (table 4). In part, the increase re- decreased $535 million, while claims on Ar- flects a pickup from the lower-than-usual lev- gentina increased $371 million and on Peru els of finance during the first half of the year, NOVEMBER 1 995 7 INTE-KRNATlONAL LEINDING AND CAPITAL MARKETS TABLE 4 bago, October 10. Moody's upgraded the PROJECT FINANCE country's rating from Ba2 to Bal, citing the U5$ millions country's achievements under its economic I994 1995Q3 reforms of the past two years (table 5). The Region 22,654 8,831 reforms have changed the structural compo- East Asia and the Pacfic 13,132 5,465 sition of the economy, encouraged foreign Europe and Central Asia 4,211 1,225 Latin America and the Caribbean 2,259 1,036 direct investment, created new export-ori- South Asia 1,274 40 ented industries, and reduced dependence Sub-Saharan Africa 938 854 Middle East and North Africa 840 211 on oil revenues. The country's recent current Sector 22,654 8,831 account surpluses are expected to continue, Power 5,820 3,374 further improving its external position. Telecommunications 1,468 0 Transportation 577 608 The third quarter also brought upgrades Other infrastructure 328 150 for Colombia, after being on review for four TABLES ~~~~~~Noninfrastructure 14,462 4,699 TABLE 5 Noifatutr 442 469 months, and for the Czech Republic. SOVEREIGN FOREIGN Source: Euromoney Loanware and World Bank. Months an d forote iCec republic. CURRENCY DEBT Moody's upgraded Colombia's foreign cur- Long-term rating, as of October resulting from uncertainties surrounding rency debt from Bal to Baa3, giving the coun- 5 5 the Mexican crisis in late 1994. With project try its third investment grade rating. The Moody's S&P finance for the first nine months of 1995 at upgrade affects about $780 million of debt se- Investment grade $17.7 billion, the total forthe year could cer- curities. The credit-rating agency cited as Chilea AI BBB tainly reach last year's $22.7 billion. The av- positive factors in its decision Colombia's sus- Colombia Baa3 BBB-/ erage loan size during the third quarter was tained growth since the beginning of its re- Cyprus n. A+2* $75.5 million and the average maturity 6.5 form program, its diversified export base, Czech Republic Baal BBB+2 years. Just under half the funds went to in- and expanding investment. Although infla- Greece Baa3 BB- frastructure projects. tion continues to be a major challenge and is India Baa3 BB+i Indonesia Baa3 BBB The share of project finance to East Asia likely to decline only gradually, Moody's still Korea, Rep. of Al A- and the Pacific increased to 62% in the quar- expects GDP growth to average 5.4% a year Malaysia Al A+/- AA+* ter, from 55% during the firsthalfof theyear. for the rest of the decade. Political instability Mata A2 Al Europe and Central Asia, Latin America, and in the short and medium term is not ex- Poland Baa3 BB2 Portugal Al AA-I Sub-Saharan Africa also registered signifi- pected to affect macroeconomic manage- AAA* cant increases, as project finance dropped to ment. Also during the third quarter, S&P Slovakia Baa3 BB+' South Africa Baa3 BB' near zero in South Asia and sharply declined assigned an A+ rating to Colombia's local Thailand A2 A in the Middle East and North Africa. currency long-term debt, with the outlook Tunisia Bas3 n.a. Mexico, after abandoning a proposed $3 considered stable. This rating is higher than Below investment grade Argentina B I BB-/ billion loan, nevertheless received the largest that on the foreign currency debt (BBB-) be- BBB* loan during the period. Initially for $500 mil- cause of Colombia's greater ability to service Barbados 8a2 n.a. Brazsi B 1 B+ lion, the syndicated loan was heavily over- local debt through taxation and control over Hungary Bal BB+' subscribed and increased to $1 billion. the domestic financial system. Mexico Ba2/ BB/ Baa2 BBB+.3 Elsewhere, a Russian corporation borrowed In mid-September Moody's upgraded the Pakstan Bl B + DM 1.3 billion ($944 million) to support the Czech Republic from Baa2 to Baal because Philippines a2 BBB_2 Midal-Stegal pipeline, which supplies Ger- of its sound macroeconomic policies and Trinidad many with gas from Russia. manageable debt burden. Moody's said that and Tobago Bal n.a. GDP has reduce infla- Turkey Ba3 8±2 strong growth helped Uruguay Bal BB+ tion, lower unemployment, and increase Venezuela Ba2 B+3 MARKET CREDITWORTHINESS consumption. The recent increase in the * The first rating applies to foreign currency debt and the second to trade deficit was not considered a major domestic currency debt. IN MORE COUNTRIES UPGRADED problem. Also during the quarter IBCA, the n.a. Not appi/cable. I. Stable outlook. The most recent upgrade for sovereign for- European credit-rating agency, assigned an 2. Positive outlook. 3. Negative outlook. eign currency debt went to Trinidad and To- A- rating to the Czech Republic's senior un- 8 FINANCIAL FLOWS AND THE DEVELOPING COUNTRIES SN--ER'NA/TiC)NAL LFENDNG AND CAPITAL MARKETS secured debt-marking the first time a major with the IMF at the end of 1995 might cause credit-rating agency has assigned an A rating slippage in fiscal and monetary policies. How- to a former Eastern bloc trading economy. ever, the outlook revision holds out the pos- In its review of Argentina, Moody's con- sibility of a future upgrade if the country firmed its Bi rating for foreign currency carries out deeper structural reforms. debt. It noted that the Argentine economy Pakistan was the only country down- remains fragile despite its resilience and abil- graded during the quarter. Moody's lowered ity to weather the Mexican peso crisis. The its rating one notch from Ba3 to BI, citing current recession is expected to continue for the country's inability to stem its political some time, and unemployment remains very and economic difficulties. The agency high. During the third quarter S&P also af- voiced concern that the government was not firmed ratings for Argentina-BB- on the committed to reform and that violence in foreign currency debt and BBB- on the peso- Karachi would blunt foreign investment. denominated local currency debt, with both S&P, however, was less pessimistic in its re- outlooks stable. view of Pakistan: it affirmed its B+ rating but S&P affirmed its B+ long-term foreign cur- revised the outlook from positive to stable. rency rating for Turkey and revised its ratings S&P does not view the slowdown in structural outlook from stable to positive. The B+ rating reforms as evidence of a lack of commit- reflects the difficult fiscal environment, high ment, but as the consequence of a difficult inflation (driven by expectations and depen- sociopolitical environment. dence on deficit financing), and growing in- Tunisia became the first Arab country to terest payments on a sizable external debt receive a rating from IBCA. The BBB- rating burden. The agency also expressed concern is the country's second investment grade that the expiration of Turkey's agreement rating. EQUITY PORTFOLIO AND FOREIGN DIRECT INVEST MENT EMERGING STOCK MARKETS earnings reports. It was also boosted by the sale of Escelsa, a power company, on the Rio * EMERGING STOCK MARKETS SHOW MIXED dejaneiro stock exchange in the first privati- RESULTS zation of a public utility. The prospects of A more stable outlook for interest rates continued strong growth in Brazil's market helped boost investment in emerging stock have become less certain because of pro- markets at the beginning of the third quar- posed changes in the tax system. President ter. Interest waned by the end of the quarter, Cardoso has proposed removing the tax ex- however, and the IFC's Global Composite emption for the profits earned by foreign Index fell 1.9% for the quarter as a whole. firms on portfolio investments, a step that The index for the Asian emerging markets could deter foreign investment in the local decreased 4.1%, while the Latin American stock market. At the same time, however, the index rose 2.4%, continuing its upward trend Brazilian government is considering provid- since mid-March. ing tax incentives to private pension funds, The Brazilian market was up 12.2% in the which would boost the market. third quarter, the largest increase in Latin Mexican equities posted gains during the America, followed by the Mexican market at quarter on reports that more than 80% of 8.6% (figure 5). The Brazilian market was Tesobonos (short-term government securi- aided by a favorable outlook for inflation and ties) had been paid back. But the market interest rates, along with good corporate continues to be hurt by the country's first NOVEMBER 1995 9 EQL ITY PORTFOLIO AND FOREIGN DIRECT INVESTMENT China and Korea led the Asian markets FIGURE 5 D forthe quarter, increasing 11.3% and 8.9%. SELECTED EMERGING STOCK MARKETS, I Since one Since last In China lower inflation accompanied by IFCG price index, percentage chonge in US$ yeo larted continued strong growth and high corporate earnings helped boost the market. Con- sumer and real estate stocks performed well -29.0 -0.6 +0.7 -15.8 -31.9 -5.5 despite the new tight credit policy. But there has also been market uncertainty, stemming from concern about the Chinese Securities Regulatory Commission's stance on tighten- ing the approval process for companies issu- ing new rights to securities, and the -6.1 +8.9 -11.4 -5.6 -~52.4 +8.6 government's announcement that new -6.1 +89 -14-. 5. ,g 86 shares in government-owned companies (1 994 A-shares worth 5.5 billion yuan) will be distributed to domestic investors. Several fac- tors led to the strong gains in Korean equi- ties: falling interest rates, the government's decision to tax fixed-income instruments but -13.0 -6.9 -11.3 -8.4 + 10.8 -20.6 to postpone the capital gains tax on stock 1L1i M L-l Ftrading until 1998, and new regulations that reduce administrative requirements for for- eign investors transacting in the local bourse Source: Intematonal Fnnarce Corporabon data. and increase the maximum share of foreign portfolio investment in domestic companies 3rd recession in a decade. The Peruvian stock from 12% to 15%. Quarter market also posted a gain-3% for the quar- Several Asian markets experienced set- 1995 -1;t>S|" ter owing to increased purchases by for- backs, however. Equities on the Philippine IFCG pnce index, percentage eigners, who own about 60% of the Stock Exchange fell 6.9% on fears that higher change in US$ investment in listed companies. The Argen- inflation will lead to higher interest rates and Since one Since last tine market was down 0.6%, however, as in- dampen corporate profits. The market also year ago quarter -23.4 + 12.2 vestors remained cautious, taking profits at experienced some uncertainty, awaiting the the slightest hint of adverse news and mak- government's decision on whether to raise oil ing the market volatile. Chilean equities fell prices to replenish the depleted oil price sta- 16% during the third quarter amid fears of bilization fund. The Sri Lankan stock market higher inflation and overheating of the fell 15.4%, as political turmoil continued and economy, a dispute in the telecommunica- corporate earnings turned out to be disap- tions industry, and uncertainty about the pointing. On the Thai and Malaysian stock fate of two yet-to-be-constructed gas pipe- markets, both affected by expectations of lines and about the planned sales of stock by higher inflation rates, equities fell 8.4% and GT Chile Growth Fund, the London-listed 5.6%. Also contributing to the decline in investment trust. In an effort to limit arbi- Thailand was the stock exchange's rejection trage activity between stocks listed on the of demands from local brokers to lower its local exchange and American depository re- 49% foreign shareholding limit in domestic ceipts, the Chilean government now re- brokerage firms. Indian equities were down quires foreign investors to deposit 30% of 5.5% for the quarter. Two factors in the poor their investments in a non-interest-bearing performance were analysts' concern that account or to pay a fee of 3%. deficit reduction targets may be difficult to 10 FINANCIAL FLOWS AND THE DEVELOPING COUNTRIES EQUITY PORTFOLIO AND FOREIGN DIRECT INVESTMENT achieve with parliamentary elections sched- pines (PCI Bank, a banking and financial ser- 3rd uled in less than a year, and investors' reac- vices firm, raised $156 million and Filinvest Quarter 1995 tion to the canceling of the Enron project by Development Corp. $160 million). China _ the Maharashtra government. To aid the raised $36.3 million for a partial privatization IFCGpnre index, percentoge market's recovery, the exchange regulatory of its Foshan Electrical & Lighting Co. change In US$ body (SEBI) said that it would ease condi- Despite first-time issues for the year from Since one Since lost tioiis it had imposed on domestic exclhanges, Chlile and Coloimbia, Latin Americain issues -17.ya +ag q.3 and the government announced that itwould continued to be low. Many companies are ex- establish central depositories in an effort to amining ways to raise finds through strategic revamp the share trading system. investors or private placement. In Chile The Turkish stock exchange dropped Banco Osarno y La Union raised $111 million 21% amid political uncertainty, higher-than- and Santa Isabel $75 million through Ameri- expected inflation and a weak lira. By con- can depository receipts (ADRs). Colombia's trast, Nigerian equities increased an Banco Industrial Colombiano raised $70.6 impressive 42%, in large part because the million through ADRs, and Companhia government issued decrees allowing foreign Brasileira de Distribuicao, the largest food re- investors to bring capital to Nigeria through tailer in Brazil, mobilized $112.2 million an autonomous foreign exchange market. through global depository receipts (GDRs). Foreign investors will no longer need per- The Mexican company Altos Hornos de Mex- mission to repatriate dividends, service for- ico raised $13.4 million in the international eign loans, or remit investment proceeds. In equity markets. Elsewhere, Hungary raised Eastern Europe Polish equities fell 1.4%, and $173.3 million through GDRs for the privati- Hungarian equities increased about 1% as zation of OTP Bank, the largest Hungarian foreign investors entered the market. issue this year. Ghana continued its privatiza- tion efforts, raising $62.3 million for Ashanti Goldfields Co. The Turkish textile finn Bossa NEW EQUITIES AND Ticaret ve Sanayi Isletmeleri raised $13 mil- DERIVATIVES lion, and Erciyas Biracilik ve Malt Sanayi raised $90 million. The South African firm U NEW EQUITY ISSUES FROM ASIA Malbak raised $47 million through GDRs. CONTINUE TO DOMINATE International equitv issues from emerging markets totaled $3.1 billion in the third quar- FIGURE 6 down from $3.7 billion in the INTERNATIONAL EQUITY ISSUES, ter, down from $3.7 b m the previous BY REGION quarter (figure 6). Activitv remains below the US$ billions peak levels seen before the Mexican peso cri- 19.6 sis. Asian firms continue to dominate, with U Other more than 70% of the volume of all issues. llI Latin America UEast and South Asia Accounting for about a third of the volume was a $ 1.1 billion issue for the privatization of Petronas Gas, the Malaysian gas distribution company. The issue was well received by in- vestors and oversubscribed 10 times. Other 37 major issues from Asia included a $271 mil- lion issue from Thailand for Total Access Communications Public Co., a $127 million 1994 1995Q2 1995Q3 issue from Indonesia for PT Semen Gresik, N."t Eqixyfigi>ei de aork Bank- 5%-c Eu--ony Boidwa,e and Worod Bank. and two international issues from the Philip- NOVEMBER 1995 11 EQUi TY PORTFOLIO AND FOREIGN DIRECT INVESTMENT TABLE 6 International equity issues appear set to in- $41 million. Two other funds launched dur- DEVELOPING crease in the fourth quarter, with Indonesia ing the period, the Blue Tiger Investment COU NTRI ES' BEST- PERFORM ING expected to issue equity for the privatization Company and the FP Russian Equity Fund CLOSED-END of PT Telkom and a tin-producing company Ltd., will invest in Russian equity securities. EQUITY FUNDS and issues also planned by Brazil, Hungary, The Oppenheimer International Bond Average Mexico, and Poland. Fund, an open-ended fund, was recently return Sept. 1995 launched to invest in international and Market (percent) * EMERGING-MARKET MUTUAL FUNDS emerging-market fixed-income securities. Korea, Rep. of(18) 9.20 CONTINUE TO STRUGGLE Several new emerging-market funds are Emerging Europe (9) 4.01 Africa (6) 2.77 According to Lipper Analytical Services, total being launched. The First South Africa Brazil (6) 2.35 returns for diversified stock mutual funds Fund, to be registered in early 1996, will al- Portugal (6) 1.53 China (16) 1.17 were barely up for the month (+0.63%) and locate 55% of its portfolio to corporate and VietNam(5) 0.80 for the quarter (+0.76%). Closed-end funds government debt and 40% to stocks traded Asia (26) 0.71 Emerging Global (30) 0.03 targeting emerging markets rose 0.6% on av- on the local bourse. The South Africa Capi- Argentina (4) -0.58 erage for the month but were down for the tal Growth Fund, in which the International Latin America (20) -1 .36 Thailand (I2) -2.24 quarter at -0.06%. This outcome is in stark Finance Corporation recently invested $20 Indonesia (I ) -2.77 contrast to that a year ago, when average net million, is a private equity fund expected to Russia (7) -2.94 assetvalue returnswere up 14.02% for emerg- raise $100 million and invest in growth com- Philippines (4) -3.16 ing portfolios in September with the largest panies in South Africa. The South Africa Pri- Chile (5) 4.07 gains by the Brazilian funds (+57.95%) and vate Equity Fund, also recently created, is Turkey (3) -5.05 regional Latin American funds (+22.61%). expected to attract institutional and domes- India(t3) -5 94 Despite the poor overall performance, some tic investors. The MFS Emerging Markets Note: As of September 30, I1995. Figures in parentheses are nulmber closed-end funds did well (tables 6 and 7). Fixed Income Fund aims to invest mainly in of funds in category. Source: Lipper International Closed- Korean portfolios gained significantly during Brady bonds and sovereign bonds. End Funds Service. September (with 18 funds averaging a return of 9.20%), driven by the two top perform- * DERIVATIVES MARKETS ARE DOWN ers-Korea Fund (+14.89%) and Korea 1990 New international bonds with derivative ele- Trust (+14.53%). The Korea Fund was also ments issued by developing-country borrow- AEVELOPING- the top performer on the NewYork Stock Ex- ers totaled $1.4 billion during the third COUNTRY FUNDS: change, with blue chip Korean corporates quarter (about 8% of total bond issues), de- ToP FIVE DISCOUNTS comprising a majority of its holdings. The clining from $1.8 billion in the second quar- AND PREMIUMS Percentage differenre between net gains by Korean funds can be attributed in ter. The total for the year through September asset value ond shore price part to the Korean government's announce- was $4.5 billion, representing a sharp drop Percentage ment that all financial instruments except from the $10 billion traded during the same difference stocks would soon be subject to a capital gains period last year, at least in part as a result of Lorgest discounts China and Eastern tax. That gave investors an incentive to switch the Mexican peso crisis. Declines have been Investment Co. Ltd. -40.23 into equities, boosting the Seoul exchange. almost across the board, although the Latin CH China Investments Ltd. -36.84 American countries have been hit hardest. Thai Prime Fund Ltd. -3s.28 U PACE OF NEW FUND LAUNCHES Of the major borrowers, only the Republic of Genesis Chile Fund Ltd. -35.24 CONTINUES TO BE SLUGGISH Thai Asset Fund Ltd. -34.31 Korea iS keepmg up the pace achieved m Largest premiums During the quarter only a handful of funds 1994. Korea's $1.7 billion in contracts so far Herzfeld Caribbean focusing on emerging-market securities were in 1995 (compared with $2.2 billion for all of Basin FunoJ Inc. 60.46 launched. New closed-end equity funds 1994) represents more than a third of the Templeton Russia Fund Inc. 21.09 raised $75 million in the quarter. The Mon- bonds with derivative elements issued by India Growth Fund Inc. 17.69 eda Chile Fund, launched injuly, closed dur- developing-country borrowers. Indonesia Funid Inc. 16.03 Emerging Mexico Fund [1.84 ing the quarter after issuing more than 2 The Stock Exchange of Hong Kong suc- Note: As of September3d, 1995 million shares and raising $21 million. The cessfullylaunched options on HSBC Holdings Source: Lipper Internationa Closed- End Funds Service. closed-end Czech Value Fund raised close to and Cheung Kong Holdings in September. 12 FINANCIAL FLOWS AND THE DEVELOPING COUNTRIES EQUITY PORTFOL.fr AND FR- ~EIN D1RECT INVESTMENT The futures contracts on Cheung Kong were strument covering the most important rules not very active, however, perhaps because in- governing FDI (for example, national treat- vestors are more familiar with stock options ment, nondiscrimination, and the trans- than stock futures, which are not traded in the parency of rules governing investment). One US. In November the Hong Kong Futures Ex- challenge for negotiators in designing the change will try to expand Hong Kong's role as agreement is to take into account the rules an international financial center by launching relevant to FDI in the final agreements of the a new currency futures contract. Uruguay Round (for example, the trade- related investment measures and the trade- related intellectual property measures). FOREIGN DIRECT INVESTMENT AND PRIVATIZATION U PRIVATIZATION ACTIVITY REMAINS IN A SLUMP K KOREA SLOWS OUTWARD FOREIGN Privatization activity has been weak in 1995. INVESTMENT Since peaking in 1992 at $29 billion, sales of Among the developing countries, the Repub- state-owned enterprises have slowed; in 1994 lic of Korea has emerged as an important revenue from privatization in developing source of investment, reaching $2.3 billion in countries amounted to about $22.2 billion. investment oufflows in 1994. But the govern- While privatization through international ment recently announced a policy aimed at equity issues boomed in 1994, in 1995 such slowing the outflow of foreign investment fi- sales have fallen off significantly (along with nanced by external borrowing. Since Octo- developing-country equity issues in general), ber, local firms wishing to invest more than although activity has picked up somewhat $100 million abroad can rely on external loans during the past few months. By contrast, pri- for no more than 80% of the cost of the in- vatization through direct sale to domestic vestment. The balance must come from their and international investors has maintained a own funds or from domestic borrowing. For steady pace over the past few years. investments of less than $100 million, external To oversee Mexico's third round of priva- loans can account for 90% of the total cost. At tization, slated for the next few months, the the same time, investment into Korea has in- government has formed a multiagency creased appreciably in 1995. By the end of panel, the Intei-Secretarial Coiimmiiissioil for Septemberithad reached $1.4 billion, already Disincorporating Parastatal Entities of Pro- surpassing the total for 1994 ($1.3 billion). ductive Units. The government plans to sell This rise was led by a more than doubling of petrochemical, power, and financial compa- foreign direct investment in manufacturing. nies. It also plans to privatize a wide range of infrastructure assets and is now completing N OECD STARTS NEGOTIATIONS ON its bidding program for a long-term conces- MULTILATERAL AGREEMENT ON INVESTMENT sion for four of the country's ports. Following an initial ministerial agreement in Brazil, continuing its privatization pro- May 1995, the OECD has initiated negotia- gram, sold 50% of the power company tions among member countries aimed at Escelsa through an auction on the Rio de reaching a multilateral agreement on invest- Janiero stock exchange that included foreign ment that would unify the rules governing investor participation; most of the offer was foreign direct investment by nationals of purchased by a consortium of banks and pen- member states. The first meeting of the ne- sion funds. But if the government is to meet gotiating group was held in Paris at the end its 1995 schedule of sales, it will need to speed of September. As envisaged by the OECD, the pace of privatization auctions. Foreign the agreement would be a legally binding in- participation in privatization is expected to NOVEMBER 1995 13 EQU'TY PORTFOLIO AND FOREIGN DIRECT INVESTMENT increase now that the 40% limit on foreign lic offer, employee participation, and invest- ownership of voting shares in Brazilian com- ment certificates given free to Slovenians. panies has been lifted. Foreigners may now Foreign investors will also be able to partici- request approval to own up to 100%. pate in the public offer. Romania is to initiate Argentina is also moving along with its pri- its mass privatization program late this year by vatization program, with the government re- allowing the public to exchange its 1992 cently announcing plans to sell Yacreta, a vouchers and 1995 coupoIIs for shares in major hydroelectric plant. The government companies to be privatized. Poland's privati- expects to generate $1.2 billion in revenues zation program is stagnating, although the from privatization in 1995, with roughly two- government has announced plans to sell thirds from foreign investors. Ecuador's gov- some tobacco and copper companies. ernment has approved a bill, deadlocked in Elsewhere, Indonesia sold PT Semen Gre- congress for more than two years, that will sikthroughapublicofferingfor$124million. allow the sale to international investors of a The government has announced that it plans 35% share in Emetel, the state telecommuni- to repay some of its debt from privatization cations company. Employees will acquire 10% revenues. Malaysia sold part of Petronas Gas of the company. Ecuador has already sold through an international public offer, raising Ecuatoriana de Aviacion to VASP, a Brazilian $1.1 billion. China raised $36.3 million airline. Peru sold 60% of Edegel, a power through a public offer of a portion of Foshan company, for $500 million to the consortium Electrical & Lighting Co., while Ghana con- Generandes. As a condition of the sale, which tinued its privatization of Ashanti Goldfields had been postponed for more than a year, the by issuing GDRs, raising $62.3 million. consortium made a commitment to invest an Azerbaijan enacted its first privatization additional $60 million to increase the com- law, which will allow cash and voucher trans- pany's power-generating capacity. actions. Vouchers will be distributed to the By December Hungary plans to sell 24% of adult population, and both domestic and for- Magyar Villamos Muvek, a power utility, to eign buyers will be able to participate in the the highest foreign or domestic bidder. The cash sales. Ukraine has sold stocks in about government announced preparations to sell 500 companies over the past few months. 25% of MOL, the country's oil and gas group, Starting in September, it has allowed foreign through an international private placement investors to participate by purchasing special and a domestic public offer. With revenues tradable privatization vouchers, issued to cit- from privatization falling far short of the $1.2 izens as compensation for losses on state billion planned, the government intends to bank deposits in 1992-93. Earlier, foreign simplify the procedures and speed the pro- participation had been limited to joint ven- cess. Slovenia is to privatize about 84% of its tures, such as the case of Philip Morris's in- oil company, Petrol, through a domestic pub- vestment in the tobacco industry. SECONDARY MARKETS FOR DEVELOPING-COUNTRY DEBT * BUYBACKS SPUR PRICES OF DEVELOPING- auction $100 million of debt (face value) was COUNTRY DEBT repurchased. Both par and discount bonds Buybacks were popular during the third quar- were bought back at prices nearly a point ter. In an effort to take advantage of cheaper fi- above the market offer price, indicating that nancing, Argentina began weekly auctions in Argentine debt holders are not anxious to sell. September to buy back some of its higher-yield- But debt prices fell after the government's pur- ing debt using funds from its recent DM 1 bil- chases in the buyback sessions began to lion ($715 million) eurobond issue. In its first weaken, disappointing traders. Argentina is 14 FINANCIAL FLOWS AND THE DEVELOPING COUNTRIES SECONDARY MARKETS FOR DEVELOPING-COUNTRY DEBT now opting for bimonthly auctions and buying FIGURE 7 back debt across the maturity spectrum. SECONDARY MARKET PRICE INDEX, JANUARY 1993- Brazil too is preparing to buy back its own SEPTEMBER 1 995 debt. The question is, how much and when? Jonucry 990=100 With many investors betting that a large por- 250 - - . . - ... tion will be purchased soon, Brazilian debt prices are rising fast. The Brazilian senate ap- 200 - . . - - - - proved a buyback, through legislation allow- All debt ing the phase-in of the remaining collateral \- - for the par and discount bonds before the rdyprbnds scheduled date of April 1996. By prepaying the collateral, Brazil avoids restrictions at- 100 tached to its $50 billion Brady deal, which pro- hibited buybacks until completion of the so -- -- i -- .. collateral phase-in. A ruling by Brazil's central bank at the end of September that allowed 0 some Bradys to be used in privatizations helped fuel an already rising market. Under Source, Table brisk trading, Brazilian pars rose to end the quarter atjust under 48 cents to the dollar. announced their desire for a $150 million The price of Peru's Citi loans increased on deal. A eurobond issue on the heels of a speculation that agreement on an $8 billion Brady deal could be expected to be attractive Brady deal was near. In mid-September Peru to the many keen investors looking for in- Citi loans jumped seven points in one week, vestment opportunities in Viet Nam. to about 70 cents. Not surprisingly, prices Although nothing concrete emerged from tended to fall somewhat afterwards, and Citis Russia's talks with the London Club during ended the quarter at 68 cents to the dollar. the first week of September, dollar Vnesh Although Peru had argued for large reduc- prices remain strong. Investors point to sev- tions in interest payments in the context of a eral factors that may affect the price of Brady-type deal, bankers were not enthusias- Vneshekonombank debt, including the tic. They questioned whether Peru had al- prospect that Russia's high-yield domestic ready bought back some of its debt, thus money markets will be opened to foreign par- reducing its interest burden. ticipation, the possibility of a new multiyear ar- Viet Nam may also be in the pipeline to ne- rangement with the IMF, and the elections for gotiate a Brady deal. It recently began nego- the Duma in December. In Eastern Europe tiations with the London Club aimed at Polish Bradys were up on anticipation of an in- resolving its $800 million in defaulted com- vestment grade rating from S&P, and Bul- mercial bank debt. Viet Nam is eager to tap garia's discount bonds rose with the news that the eurobond market: authorities have the current account deficit had improved. OFFICIAL FLOWS: MULTILATERAL AND BILATERAL MULTILATERAL FLOWS opment and the International Development Association combined) amounted to $22.5 * WORLD BANK GROUP ACTIVITIES billion in the fiscal year ending June 30, EXPANDED LAST FISCAL YEAR 1995, an increase of $1.7 billion over fiscal World Bank commitments (by the Inter- 1994. The Bank plans to enlarge its role in national Bank for Reconstruction and Devel- catalyzing private investment through guar- NOVEMBER 1995 15 'DFFC-AL_ FL.O'VNS. MUL.TILArERAL AND BiLATERAL antees, by modifying the rules governing a MIGA ISSUES NINE INVESTMENT guarantees to broaden eligibility, modify the GUARANTEE CONTRACTS fee structure, and simplify procedures. Guar- The Multilateral Investment Guarantee antees extended by the Multilateral Invest- Agencyissued nine investmentguarantee con- ment Guarantee Agency have expanded tracts during the third quarter for a total of rapidly: the coverage issued reached $672 $261 million in coverage, twice the coverage million in fiscal 1995, compared with $373 provided in the third quarter of 1994. The sec- million the previous year. The International tors covered include industry, power, petro- Finance Corporation continued its rapid chemicals, minerals, and transport. MIGA growth of recent years; approved financing also has five commitment letters outstanding for the IFC's own account reached $2.9 bil- for a potential liability of $127 million. lion in fiscal year 1995, a nearly 20% increase over the previous year. U INCREASED RESOURCES FOR THE IMF DISCUSSED AT ANNUAL MEETINGS * C6TE D'IVOIRE REFORMING COCOA Steps to increase resources to the Interna- SECTOR WITH $150 MILLION CREDIT tional Monetary Fund were discussed at the C6te d'Ivoirian farmers, after years of receiv- fiftieth annual meetings of the IMF and the ing only a fraction of the world price for their World Bank in October, including proposals cocoa and coffee exports, are expected to for a substantial increase in quotas; a dou- benefit from the elimination of the state bling of the resources currently available commodities board during the next phase of under the General Agreements to Borrow; the government's reform program. The and a continuation of the enhanced struc- World Bankwill provide a $150 million credit tural adjustment facility, the IMF's conces- to support the program, with cofinancing sional financing facility for low-income from France ($60 million) and Germany countries engaged in growth-oriented ad- ($21 million). justment. The Interim Committee discussed measures to strengthen the IMF's surveil- U $500 MILLION LOAN BOOSTS lance of member countries through re- ARGENTINA'S BANK REFORM PROGRAM quirements for more timely provision of Many Argentine banking institutions are comprehensive and good-quality data. Com- struggling to survive in the aftermath of mitments under arrangement with the IMF Mexico's financial crisis. To support the increased to $24 billion during the fiscal country's bank reform program and year ending April 30, 1995, compared with strengthen a trust fund for distressed banks, less than $5 billion in fiscal 1994. The fiscal the World Bank recently approved a $500 1995 figure includes commitments under niillion balance of payments loan. It is standby arrangements to Mexico and Russia hoped that weak or insolvent banks will leave of $14 billion. the system through mergers and acquisi- tions, resulting in a stronger banking sector. U THE IDB OFFERS PARTIAL GUARANTEES The consolidation process is already under FOR PRIVATE DEBT FINANCING way: the number of commercial banks has The Inter-American Development Bank has fallen from 168 at the beginning of the year inaugurated a program of partial risk and to about 130. This is the second World Bank credit guarantees for private debt financing, loan for the financial sector since the crisis to help attract private lending for infra- began. In May $500 million was disbursed to structure in Latin America and the help in the privatization of Argentina's Caribbean. All 26 of the bank's borrowing provincial banks. member countries are eligible for the guar- 16 FINANCIAL FLOWS AND THE DEVELOPING COUNTRIES C'FFicv-AL FLt'DS IU'MLrILATE.RAL AND BHLATERAL antees, which need not be used in conjunc- third quarter. They included a Y5,523 mil- tion with an IDB loan. The program, which lion ($55 million) loan to support Papua will offer coverage against the risk of the pub- New Guinea's structural adjustment pro- lic sector's reneging on its contractual obli- gram (in cooperation with the IMF's $110 gations, will help official borrowers access million standby arrangement); a Y5 billion greater financing with longer maturities. ($50 million) loan to South Africa's Indus- trial Development Corporation for the pur- chase of equipment and senices fromJapan, BILATERAL ODA AND EXPORT EXIM Japan's first direct export loan to that CREDITS country; and an untied loan to Paraguay (equivalent to $50 million) to finance private * JAPAN TO BOOST FOREIGN AID sector investment. Foreign ministry officials in Tokyo an- nounced that 1996 expenditures on official U US Ex-IM BANK INTRODUCES NEW development assistance will be more than 3% EXPOSURE FEE SYSTEM higher than the previous year. This increase On October 1 the Export-Import Bank of comes at a time when other bilateral donors, the United States introduced a new expo- under increasing budgetary pressures, are sure fee system, transaction pricing, that will considering reducing foreign aid. Although accept greater variation in individual credit Japan's budget will not be formally approved risks, public or private. The more flexible until the end of the year and adjustments are pricing system should benefit developing still possible, it is almost certain that Japan countries: it will permit relatively creditwor- will maintain its position as the world's top thy private borrowers direct access to US Ex- donor. Im support (rather than requiring them to obtain a local bank guarantee, as often done a EXIM JAPAN ACTIVE IN QUARTER in the past), and ratings of private sector The Export-Import Bank of Japan provided firms will no longer be constrained by the loans for a variety of purposes during the sovereign rating. OECzT aELE - 'iPotAu E OFFICIAL CREDITORS 1982, and on previously rescheduled debt owed by the former Yugoslavia. The agree- r* PARIS CLUB CREDITORS REACH TWO ment has not yet been signed. AGREEMENTS IN THIRD QUARTER The Paris Club reached two agreements dur- ing the third quarter, bringing the total to 15 COMMERCIAL CREDITORS for the year (table 8). Algeria signed its sec- ond Paris Club agreement on July 21. For * PANAMA RESTRUCTURES COMMERCIAL pre-cutoff debt, principal payments due over BANK DEBT the next 36 months and late interest were The term sheet for Panama's Brady-style re- rescheduled over 15 years. The former Yu- structuring was released on October 6, 1995. goslav republic of Macedonia negotiated its Panama will exchange about $2 billion of first Paris Club agreement on July 17. The medium- and long-term commercial bank agreement provides for the rescheduling of debt and interest arrears thereto for new in- arrears and debt service over a 12-month pe- struments. With respect to principal, four op- riod on debt contracted before December 2, tions are available to eligible debt holders: NOVEMBER 1 995 17 DEBT RELIEF UPDATE 30-year par bonds with the principal collat- terest rate of 3% (rising to 5.5% by year 11); eralized by US Treasuries and an initial in- 30-year discount bonds, also secured by US Treasuries, with an interest rate of six-month TABLE8 LIBOR plus 13/16%; 18-year interest reduc- PARIS CLUB RESCHEDULING AGREEMENTS, JANUARY-OCTOBER 1995 tion bonds with a five-year grace period, a US$ millions fixed interest rate for the first seven years, Dote of Consolidated Cutoff Consolidation Country agreement amount date period through Terms and a rate of six-month LIBOR plus 13/16% Cambodiaa 1/20/95 249 12/31/85 630/97 Naples thereafter; and a new money option, under Guinea 1/25/95 156 /1/86 12/31/95 Naples which banks would exchange eligible princi- Uganda' 2/20/95 110 7/1/81 Stock Naples Guinea-Bissau 2/23/95 195 12/31/86 12/31/97 Naples pal for 20-year debt conversion bonds (fixed Togoa 2/23/95 239 1/1/83 9/30/97 Napes interest for the first seven years, LIBOR plus Chada'c 2/28/95 24 6/30/89 3/31/95 Napes Croatiad 3/20/95 861 12/2/82 12/31/95 Standard 13/16% thereafter) and purchase new bonds Nicaragua 3/21/95 848 I1/1/88 6/30/97 Naples equal to 10% of the value of the debt con- Bolivia 3/24/95 482 12/31/85 12/31/97 Naples version bonds Panama resumed payment of Senegal 4/20/95 69 l/l/83 8/31/97 Naples Hati 5/30/95 117 10/1/93 3/31/96 Napes interest on all eligible debt with a $2 million Russian Federationd 6/3/95 6,400 I/l/91 12/31/95 Standard payment at the end ofJune 1995. At closing, Mauritania 6/28/95 66 12/31/84 12/31/97 Naples Macedonia FYRdCe 7/17/95 288 2/2/82 6/30/96 Standard the balance of the past due interest, after cer- A/ge jad 7/21/95 7,320 9/30/93 5 31/98 Standaro tain adjustments, will be exchanged for 20- FYR is former Yugoslav Repub c. a. Agreement not available. year noncollateralized bonds with 10 years b. Ma nly previously rescheduled debt. c. Agreement implemented before signing date. grace, guaranteed amortizahon payments, d. With graduated payments. and a floating interest rate of six-month e. Agreement negotiated but not signed. Source: World Bank. LIBOR plus 13/16%. COMMERCIAL BANK PROVISIONING AND CAPITAL ADEQUACY U MAJOR US BANKS SHOW SLIGHT DECLINE tios for major European banks showed some IN CAPITAL ADEQUACY RATIOS improvement, although earnings of major Preliminary data for the third quarter indi- French and German banks (with the excep- cate a slight decline in capital adequacy ra- tion of Commerzbank) are expected to fall tios (tier 1 and total) for major US banks in the third quarter, due to sluggish growth despite strong earnings reported by the in lending and heavy provisioning require- largest of these banks (table 9). Capital ra- ments for the real estate activities of some French banks. Data on the capital adequacy TABLE 9 ratios for Japanese banks are not yet avail- RISK-WEIGHTED CAPITAL RATIOS Percent, September 1995 able for the second and third quarters. How- Tier I Total Tier I Totol Tier I Total ever, at the end of September, Daiwa Bank, Britain (f)a France (F)2 Japan (Y)b Japan's twelfth-largest bank, announced Barclays 7.8 11.5 BNP 5.8 9.7 Dai-Ich Kangyo 5.0 8.7 losses of more than $1 billion (about 8% of BSBC 9.4 14.5 Credit Lyonnais 4.5 8.5 Sakura 4.8 8.7 Lloyds 8.2 13.3 Paribas 8.6 9.3 Sumitomo 4.9 8.5 its capital) stemmig from trades i the US Nat West 6.5 10.4 Socit6 G6n6rale 5.7 9.0 treasury bond market. Daiwa plans to cover United Strtes (US$) these extraordinary losses by slowing write- Canoda (C$) Germany (DM)' Bankers Trust 8.0 12.8 Bank of Montreal 7.1 9.6 Commerzbank 5.I 9.0 Citicorp 8.4 12.3 offs of bad debts and accelerating sales of Bank of Nova Scotia 6.7 10.0 Deutsche 5.7 10.2 j. P. Morgan 8.4 12.4 real estate and equity holdings in other com- Canadian Imperial 7.1 9.9 Dresdner 6.0 10.0 National Bank 7.1 I. I panies. Daiwa's troubles have given further a. As ofJune 30, 1995. impetus to calls for improved regulation of b. As of March 31, 995. Source: Salomon Brotners, IBCA. Japan's banks. 18 FINANCIAL FLOWS AND THE DEVELOPING COUNTRIES FINANCIAL BRIEF PORTFOLIO FLOWS AFTER MEXICO: THE END OF INNOCENCE After rapid sustained growth in the early 1990s, portfolio flows to developing coun- NET PRIVATE CAPITAL FLOWS TO ALL DEVELOPING tries eased in 1994 and then declined sharply COUNTRIES, 1976-94 following the Mexican peso crisis in Decem- US$ billions ber 1994 (figure 8). Secondary market prices 200 E Debt flows for developing-country debt securities and Direct foreign investment equities (particularly from Latin America) /5* Portfolio equity flows fell sharply during the first quarter of 1995 (figures 7 and 9). Both markets staged a re- covery in the second quarter, and even Mex- loo ico and Argentina returned to the markets. However, recent issues generally have been at shorter maturities and, for comparable 50 loans, at higher interest rates than precrisis levels. 0 To give international market participants 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 an opportunity to discuss the consequences Snore. Word Bank Debtor Reporting System andWdBk or at snaffestimates of the recent crisis in Mexico for emerging markets, the World Bank organized a semi- FIGURE 9 nar during the Bank-IMF annual meetings. IFC GLOBAL PRICE INDEXES OF EMERGING MARKETS Speakers included Ernst-Moritz Lipp, senior October 1, 1993 I00 general manager of Dresdner Bank Group; 160 Pedro Malan, minister of finance of the Re- public of Brazil;J. Mark Mobius, president of Templeton Emerging Markets Fund; and 140 IFCG Composite IFCGAsia George F. Russell,Jr., chairman of the Frank Russell Company. Rupert Pennant-Rea, chairman of Caspian Securities Ltd and for- f\ mer editor of the Economist, served as / moderator. oti The seminar addressed several issues of importance to investors in emerging mar- kets: Did the Mexico crisis change investors' 80 10/1/93 1/21/94 5/13/94 9/2/94 12/23/94 4/14/95 8/4/95 attitudes toward developing countries? What should governments do to build investor con - -__e_I_FC_E,,__g__g_Markets_database fidence? What does the crisis suggest with re- gard to the role of multilateral institutions in emerging markets after the crisis and only a promoting investment in emerging markets? limited fall in Mexico. This is an important Participants did not believe that the peso indicator of market trends, as institutional crisis would have a long-term impact on in- investors have been a major source of capi- vestors' views of developing countries. Cit- tal growth for emerging markets (in 1993 in- ing data on investment decisions by a key stitutional investors made more than 16% of group of international equity managers, one their purchases in emerging markets, com- participant concluded that there was no pared with less than 0.5% in 1987). An in- broad-based decline in investments in formal survey of pension plan sponsors and NOVEMBER 1995 19 FINAN NCIA1 7AfREF international money managers with invest- All participants emphasized the impor- ments in emerging markets also detected lit- tance of stable macroeconomic policies for tle change in interest as a result of the attracting foreign investment. They view Mexican crisis. volatility in financial markets as evidence of a Another participant viewed the events in lack of confidence in the fundamentals and Mexico as an opportunity rather than a set- in the credibility of government policy. Re- back: adjustments and improved economic cent World Bank studies provide further eni- fundamentals resulting from policv correc- dence that economic fundamentals are the tions have already spurred a recovery. Partic- most importaint factor in achieviing sustain- ipants recognized, however, that this able private capital flows.1 Conversely, as de- optimistic view holds largely among institu- veloping countries gain greater access to tional investors concerned with long-term foreign capital, international markets will developments, rather than among trade- play a larger role in imposing financial disci- oriented investors or holders of short-term pline. One positive outcome of the Mexican money market instruments. Participants also crisis was renewed commitment by some believed that as investors gain more sophisti- countries to accelerating economic reforms. cated knowledge about developing-country In reviewing ways that governments could markets, the contagion effects of future boost investor confidence, participants also crises should diminish. emphasized the need to establish a level play- ing field for domestic and foreign investors -IGURE 10 and to strengthen the regulatory institutional FIGURE 10 INTERNATIONAL BOND ISSUES FROM DEVELOPING COUNTRIES, framework and market infrastructure. For ex- 1990-95 ample, in many countries the lack of a central LJS$ billions registry for equities has limited the liquidity of 60 instruments and greatly increased the costs of 50 fo Other investment, especially to foreigners. LEurope and Central Asia The multilateral institutions also can do 40 Latin America and Caribbean much to encourage investment in emerging East Asia and Pacific markets-by acting as a stabilizer during 30 crises (when appropriate, "leaning against the wind" to allay market fears), disseminating in- 20 formation on emerging markets, and provid- ing guarantees to cover the sovereign risks lo , _ f _ _ _ , f _ faced by private investors in these markets. 0 1990 1991 1992 1993 1994 1995 1. Morris Goldstein, Coping with Too Much of a Good Thing (1995). and Eduardo Fernandez-Arias and Note: Data for 1995 are for January-Se ptember a ny. ';rurce: Euromoney Bondware and WorSd Bank staffesti,mates. Peter J. Montiel, The Surge in Capital Inflows to De- veloping Countries (1995). 20 FINANCIAL FLOWS AND THE DEVELOPING COUNTRIES - r . T; I'1!A L A A F5P EP N r9 r I X TABLE A.1 BANK AND TRADE-RELATED NONBANK CLAIMS US$ millions 1994Q4 Trode-reloted Bank Suarcnteed nonbank Country grsup or country 1990 1991 1992 1993 1994Q2 Total clolms clarms claims All developing countries 749,424 788,765 826,525 839.626 882.147 919,369 745,920 24,369 173,589 EastAsia and Pacific 148,577 173,722 198.924 218.659 247,028 274,563 240,566 24,052 33,998 Europe and Centra Asia 184,089 189,401 189,423 192,662 97,977 198,452 160,650 33,065 37,925 Latin America and the Caribbean 238,974 244.805 257,599 258,081 258,884 266,017 229,177 30,580 36,849 Middle East and North Africa 94.922 1 00,C 18 95,751 92,048 96,766 97,595 62,564 2 .236 35,031 South Asia 22,489 2 1,566 25,083 23,265 25,132 26,165 21.116 6.096 5,049 Sub-Saharan Africa 60,373 59,253 59,745 54,91 56,360 56,577 31.847 9.340 24,737 Severely indebted middle-income 222,459 219,944 223,044 217,361 222,485 211,9 2 161,517 16,890 50,395 Angola 2,370 2,680 3,453 3,167 3,192 2,824 1,657 677 1,167 Argentina 34,475 36,356 39,640 35,671 37.246 39,469 32,784 3,235 6,685 Boliva 463 534 604 691 667 618 323 44 295 Brazi 76,167 71,93 74.069 76,872 75,335 71,106 62,253 4,132 8,853 Bulgaria 9,348 8909 8,067 7,140 6,982 3,901 3,181 430 720 Cameroon 2,757 2.843 2,667 2,481 2,580 2,719 1,252 487 1,467 Congo 1.724 1,622 1,716 1,737 1,829 1,919 1,019 300 900 Ecuador 4,773 4,553 4,198 3,66 3,568 3,889 3.251 405 638 Jamaica 975 737 753 772 732 865 608 48 257 Jordan 3,657 3,297 2,869 2,700 2,705 2.585 1,598 661 987 Morocco 8,002 8,053 7,994 7,4 0 8,014 7 830 5.184 2,470 2,646 Panama 22,855 22,926 22,725 23,955 25.624 26,237 25,891 205 346 Peru 6,179 6,143 6,423 5.972 6,155 6.224 3,377 402 2,847 Po and 26,301 27,099 25.569 23,734 24,1 1 1 18,959 7,597 2,513 1 1,362 Syrian Arab Republic [.2 9 1.107 1,034 1,229 1,182 1,258 582 46 676 Uruguay 2,226 1,991 2,581 2,776 2,562 2,440 2,346 140 94 Severely indebted low-income 50,281 49,707 50,229 48,814 48,872 49,631 28,810 4.282 20,827 Moderately indebted low-income 38,125 36,848 38,586 35,065 36,605 37,0 3 25,039 7,647 11,974 Moderately indebted middle-income 292,128 309,373 322,750 321,041 328,047 344,361 289,335 65,417 55,027 Selected countriesa 347,822 381,356 410,694 430,990 461,539 498,057 422,617 71,077 75,440 Algeria 21,014 21,805 18,661 18.208 20,454 21,065 15,583 10,287 5.482 Chile 9,823 9,149 1 1.188 .293 12,038 13,747 12,488 814 1,259 China 34,430 '1,381 48.566 56,299 61,365 67,768 58,534 10,094 9,234 Colombia 8,889 8,479 8,795 9,244 10,018 10,799 9,505 .268 1,294 C6te d'lvo re 4.379 4,042 3,986 3,625 3,597 3,584 2,1 I0 292 1,474 Egypt 4,224 13,569 11,886 10,448 10,377 9,93 3.109 1,331 6,822 Hungary 12,359 11,151 9,289 8,004 8,242 8,816 7,975 803 841 India 15,640 15,383 18,601 16,460 17,632 18,295 15,587 3,693 2,708 Indonesia 34,850 39,773 46,967 44,730 46,442 51,158 42,583 5,499 8,575 Korea, Rep. of 36,216 41,820 44,598 47,078 54,526 63,500 61,106 2,086 2,394 Malaysia 9,252 10,062 12,886 17.937 19,893 17,317 14,838 1,875 2,479 Mexico 62,684 72,485 75,687 78.819 79,543 87,133 78,178 13,749 8,955 Nigera 12,796 12.896 3,386 12,348 12,621 12,903 4,216 1,936 8,687 Philippines I ,969 11,839 1 1,063 10,715 11,070 1 1,471 7,082 2.233 4,389 Tha land 18,035 24,953 30,552 37,872 49,487 59,610 54,730 1,939 4,880 Turkey 22.230 23,094 24,425 29,238 26,657 24,784 20,533 8,022 4,251 Venezuea 9,032 19,475 20,158 18,672 17,577 16,176 14.460 5, 56 1,716 Offshore banking centers 1 14.937 1 19,142 135,967 147,872 158,46 156.980 148.217 5,714 8,763 Oil exporters 176,696 185,856 187,950 133,764 137.851 125,534 92,844 28,807 44,178 DRS reporters 32,264 139,563 142,242 87,374 85,877 84,892 54,205 24,915 30,687 DRS reporters 636,?46 673,182 708,689 78 .458 820,469 857,837 712,681 115,498 145,295 Note: See country c assifications at the end of this statst cal appendix. a. Most of these countries are a so included in the indebted country groups. Source: OECD; Bank for International Settlements. Statistics on Externoi Indebtedness. NUO Eov i, 7 ... -2 R! z~ -5 21 S TA-.5TICAL- APPENDIX TABLE A.2 COMMERCIAL BANK CLAIMS ON DEVELOPING COUNTRIES US$ millions Claims Liabilities Country group or country 1993 1994Q3 i994Q4 1995Qi 1993 1994Q3 1994Q4 1995QI All developing countries 698,999 733,897 754,772 794,286 550,560 593,379 623,845 666,489 EastAsiaand Pacific 189,838 219,070 236,382 257,308 108,791 111,735 116,911 116,764 Europe and Central Asia 156,234 158,477 156,251 172,825 97,155 1 14,662 121,882 138,033 Latin America and the Caribbean 227,879 224,652 232,888 231,529 37,289 146,279 159,312 164,105 Middle East and North Africa 72,023 76,192 73,834 75,007 136,128 138,180 139,774 152,271 South Asia 20,856 23,040 23,8 1 8 24,555 40,546 49,535 52,914 59,153 Sub-Saharan Africa 31,598 32,466 31,599 33,062 30,477 32,988 33,052 36,163 Severely indebted middle-income 174,863 173,633 167,965 171,052 121,971 133,370 142,827 150,855 Angola 1,783 1,683 ,601 1,488 472 462 476 509 Argentina 29,628 31,346 32,871 33,538 18,600 18,604 9,193 20,266 Bolivia 412 422 323 318 798 876 840 821 Brazil 68,106 62,362 62,392 62,852 25,645 27,709 33,937 37,571 Bulgaria 6,461 3,682 3,153 3,264 1,225 1,526 1,596 1,653 Cameroon 1312 1,311 1,238 1,279 517 587 772 838 Congo 1,029 1,026 884 943 297 299 296 344 Ecuador 3,100 2.963 3,244 2,834 2,484 2,553 3,497 3,263 Jamaica 497 433 604 589 633 662 816 853 Jordan 1,576 1,434 1,374 1,401 6,202 6,228 6,348 6,333 Morocco 4,934 5,211 5,057 5,217 5,791 6,534 6,603 6,765 Panama 30,577 34,576 33,155 34,715 35,776 38,620 40,292 41,845 Peru 3,092 3,461 3,309 3,467 3,931 6,418 5,245 4,801 Poland 1 1,694 1 1,066 7,508 7,418 6,993 9,075 8,900 10,273 Syrian Arab Republic 603 548 575 603 5,502 5,975 6,050 6,376 Uruguay 2,696 2,453 2,338 2,196 4,760 4,804 5,526 5,676 Severely indebted low-income 29,372 28,897 27,915 28,184 31,724 33,620 33,291 35,375 Moderately indebted low-income 22,648 24,124 24,369 25,304 39,479 47,204 48,030 52,339 Moderately indebted middle-income 270,081 274,524 279,702 289,044 139,009 147,379 155,866 160,815 Selected countriesa 360,340 388,924 410,769 432,243 227,347 239,780 251,880 258,166 Algeria 13,675 14,964 14,275 14,418 2,857 3,909 3,866 3,780 Chile 10,127 10,705 12,378 12,075 7,955 10,210 1 1,575 12,306 China 48,581 54,682 56,482 58,279 49,151 55,043 59,950 59,494 Colombia 7,948 8,962 9,470 9,568 7,220 8,238 8,676 7,624 C6te d'lvoire 2,265 2, SI 2,054 2,048 2,014 2,5 10 2,219 2,776 Egypt 3,526 3,264 3,062 3,163 25,597 27,436 27,968 29,051 Hungary 7,3 14 7,752 7,926 8,834 2,322 1,751 1,967 2,1 22 India 13,921 14,937 15,504 15,795 7,743 10,180 10,381 13,702 Indonesia 37,201 39,473 41,610 44,262 12,576 1 1,484 10,388 10,553 Korea, Rep. of 45,217 54,768 61,093 69,194 15,200 17,297 20,542 21,196 Malaysia 16,020 15,608 14,477 16,270 19,236 13,232 10,323 8,608 Mexico 69,721 72,388 77,384 75,596 25,482 22,948 25,829 24,427 Nigeria 3,971 3,921 3,643 3,570 4,615 4,452 4,594 4,593 Philippines 6,607 6,290 6,557 6,632 5,806 6,012 6,749 6,680 Thailand 34,1 35 46,605 54,462 60,900 4,989 6,809 7,040 8,374 Turkey 22,839 17,858 16,987 18,356 IS, I 10 17,485 18,952 21,806 Venezuela 17,272 14,596 13,405 13,283 19,474 20,784 20,861 21,074 Offshore banking centers 1,070,414 1,145,583 1,164,306 1,236,328 904,639 997,001 1,051,967 1,075,225 Oil exporters 102,583 108,620 103,395 105,874 158,431 160,891 162,335 173,390 DRS reporters 55,448 53,802 51,003 51,883 41,906 43,110 43,623 44,906 DRS reporters 656,071 691,021 71 1,502 748,518 460,472 499,924 529,723 556,053 Note: See country classifications at the end of this statistical appendix. a. Most of these countries are also included in the indebted country groups. Source: Bank for International Settlements, International Banking and Financial Market Developments. 22 FINANCIAL FLOWS AND THE DEVELOPING COUNTRIES STATISTICAL APPENDIX TABLE A.3 COMMERCIAL BANK CLAIMS ON DEVELOPING COUNTRIES, BY COUNTRY OF ORIGIN US$ milrions Conoda France' Country group or country 1993 1 994Q3 I 994Q4 1995Q I 1991 1992Q3 1992Q4 1993QI All developing countries 17,430 15,412 15,822 16,888 78,712 85,008 77,821 77,192 EastAsiaand Paccfc 1,969 2,047 2,364 2,317 14,303 17,026 15,012 16,979 Europe and Central Asia 490 5 9 302 304 16,932 18,917 18,251 16,736 Latin America and the Caribbean 14,128 1 864 12,220 13,060 17,399 18,292 17,184 16,592 Middle East and North Africa 295 345 344 343 17,371 17,467 15,524 15,269 South Asia 438 465 433 570 1.939 2,523 2,169 2,142 Sub-Saharan Africa 110 172 160 294 0,769 10.782 9,681 9,474 Severely indebted middle-income 3.981 3,646 3,574 3,714 23,418 24,134 22,549 21,517 Angola .. .. .. .. 730 744 745 628 Argentina 680 703 709 793 2,335 2,298 2,350 2,099 Bolvia .. .. .. .. 18 18 19 18 Brazil 2,736 2,399 2,383 2,422 7,885 8,292 7,693 7,447 Bulgaria .. 654 664 621 542 Cameroon .. 809 768 685 787 Congo .. 697 714 669 508 Ecuador .. 164 152 167 125 Jamaica .. 14 12 10 7 Jordan .. 1,020 1,095 746 740 Morocco .. .. .. .. 2,199 2.296 2,157 1,986 Panama 234 182 225 240 2,530 2,596 2,623 2,627 Peru 73 78 87 87 640 629 571 508 Poland 259 284 171 172 1,321 1,425 1,308 ,288 Syrian Arab Republic .. 271 285 271 241 Uruguay .. 130 186 162 190 Severely indebted low-income .. 6,874 7,33 6,478 6,146 Moderately indebted low-income 224 234 264 335 4,678 5,181 4,404 4,308 Moderately indebted middle-income 3,755 4. 53 4,482 4,693 25,851 26,528 25,13 23,455 Selected countriesb 5,671 6,180 6,804 7,015 33,827 36,943 33,002 34,163 Algeria 2 32 35 54 5,775 5,287 4,613 4,656 Chile 476 553 540 598 437 539 543 513 China 255 331 473 410 3,769 4,645 4,512 5,716 Colombia .. .. .. .. 512 575 589 624 Cote d'lvo re .. .. .. .. 1,936 2,065 1,793 1,412 Egypt .. 2,437 2,364 1,972 1,851 Hungary .. .. .. .. 217 175 153 144 India 224 234 264 335 1,362 1,783 1,451 1,328 Indonesia .. .. .. .. 2,537 2,692 2,431 2,541 Korea, Rep. of 843 838 885 969 4 573 5,904 4,664 5,205 Malaysia 381 315 297 234 455 7 2 659 694 Mexico 2,3 2 2.578 2,926 3,004 2.357 2,849 2,610 2,669 Nigera .. 1,500 1.295 1,129 1,008 Philippines 266 247 297 322 1,389 894 81 731 Thaland 224 315 412 382 1,276 1,701 1,668 1,850 Turkey .. 1,928 2,077 2,093 2,072 Venezuela 688 735 675 709 1,367 1,386 309 . 1,150 Offshore banking centers 10,602 11,562 11,610 12,045 35,166 42,766 40.286 38,450 Oil exporters 1,088 1,410 1,384 1,450 21,848 22,67 21,364 19,901 DRS reporters 1,037 1,284 1,248 1,327 17,114 17,633 16,221 14, 36 DRS reporters 12,255 1 1,769 1 1,909 12.831 68,657 74,763 68,084 68,609 (table contrnues on next page) NOVEMBER 1995 23 TABLE A.3 COMMERCIAL BANK CLAIMS ON DEVELOPING COUNTRIES, BY COUNTRY OF ORIGIN (CONTINUED) US$ millions Germoany' Itly Country group or country 1993 1 994Q2 1994Q3 1994Q4 1993 1994Q I 1 994Q2 1994Q3 AlIdevelopingcountries 140,475 155,695 160,139 156,689 18,129 18,600 18,307 21,212 East Asia and Pacific 17,049 21,096 22,445 24,152 56 82 52 123 Europe and Cenitral Asia 62,229 68,080 67,952 64,400 8,347 8,218 8,132 8,431 Latin America and the Caribbean 33,580 34,282 33,928 33,128 5,479 5,586 5,528 7,938 Middle East and North Africa 1 1,531 14,338 16,991 16,799 559 783 706 633 South Asia 7,798 9.281 9,677 9,267 2,573 2,729 2,806 2,902 Sub-Saharan Africa 7,124 7,293 7,739 7,401 1.1 14 202 1,082 1,185 Severely indebted middle-income 33,829 37,449 35,786 32,422 4,824 5,035 4,914 6,387 Angola ' ' Argentina 6,776 7,309 7,384 7,768 1,902 1,912 1,896 2,442 Bolivia 323 367 386 390 .. 5 5 8 Brazil 11,041 10,607 9,775 9,028 714 830 800 1,729 Bulgaria 2,636 2,748 1,608 1,212 516 550 570 362 Cameroon 758 815 842 762 Congo Ecuador 583 590 636 617 149 147 146 161 Jamaica Jordan 411 466 469 480 .. Morocco 1,039 ,119 1,139 1,147 305 318 299 295 Panama 1,669 1,883 2,805 2,372 .. Peru 996 1,005 1,027 015 76 71 82 176 Poland 5,045 5,381 4,356 2,202 1,I I, 54 1,060 948 Syrian Arab Republic 516 556 574 589 .. Uruguay 138 150 196 158 52 49 56 267 Severely indebted low-income 5,256 5,589 5,166 5,995 732 772 667 734 Moderately indebted low-income 9,963 10,839 11,267 11,544 90 94 98 102 Moderately indebted middle-income 62.777 67,139 69,093 67,533 8,697 8,660 8,550 9.782 Selected countriesb 48,531 53.585 56,005 57,035 3,495 3,497 3,342 4.128 Algeria 1,346 1,580 604 1,653 .. Chile 1,716 1,637 1,678 1,854 139 132 120 333 Ch na 2,668 4,120 4,940 4,762 .. Colombia 1,205 1,435 1,475 604 104 70 79 317 C6ted'lvoire 342 362 373 358 7 42 14 12 Egypt 2,474 2,642 2,707 2,635 Hungary 3,191 3,684 3,905 4,036 189 177 195 297 India 5,472 5,973 6,271 6,592 - - Indonesia 4,560 5,042 5,677 5,981 Korea, Rep. of 3,736 4,665 4,858 5,402 Malaysia 1.659 2,042 1,966 1,929 .. Mexico 5,044 5,274 5,568 5,179 1,577 1,573 1,552 1,584 Nigeria 611 747 699 670 725 730 653 722 Philippines 704 894 826 900 56 82 52 123 Thailand 3,038 3,552 3,789 4,042 . Turkey 8,166 7,490 7.278 7,284 Venezuela 2,597 2,445 2,392 2.154 697 692 678 738 Offshore banking centers 77,246 84,434 89,321 93,730 20,820 22,707 22,165 22,950 Oil exporters 41,399 14,282 17,035 16,189 7,356 7,357 7,206 7,349 DRS reporters 38,268 8,529 10,993 10.716 7,356 7.357 7,206 7,849 DRS reporters 96,442 137,755 143,016 139,560 8,681 8,935 8,689 10,951 24 FINANCIAL FLOWS AND THE DEVELOPING COUNTRIES STATISTICAL APPENDIX Netheronds3 Switzerlond Country group or country 1992 1993 1 994Q2 1994Q4 1991 1992 1993 1994 All developing countries 21,291 22,902 27,123 26,904 23,632 23,769 25,453 28,698 East Asia and Pacific 3,326 4,197 5,070 6,023 2,246 2,604 3,593 3,951 Europe and Central Asia 4,417 4,372 4,169 4,576 7,283 5,569 5.549 5,145 LatinAmericaandtheCaribbean 9,512 10,334 13,585 1 1 678 8,273 9,498 10,231 12,817 M dd e East and North Africa 1,782 2,027 2,016 1.841 2,836 3. 64 3,136 3,293 SouthAsia 905 486 744 ,353 527 718 975 1,019 Sub-SaharanAfrica 819 1,106 1. 94 ,213 2,468 2,215 i.969 2,474 Severely indebted middle-income 5,002 6.085 8,719 7,397 10,044 9,504 9,367 9,324 Angola .. . .. .. 63 106 76 48 Argent na 1.439 .425 1,503 1,622 1,471 1,604 1,365 1,821 Boliva .. .. .. .. 12 16 25 43 Brazil 2.003 2,772 4,582 3,139 2,812 2,82 3,023 2,232 Bulgaria . 445 248 264 75 Cameroon .. .. .. .. 51 43 41 42 Congo .. .. .. .. 4 1 2 2 Ecuador 257 360 455 391 125 132 145 163 Jamaica .. .. .. .. 8 8 2 2 Jordan .. .. .. .. 93 106 82 96 Morocco .. .. .. . 62 131 17 141 Panama 403 465 608 779 3,782 3,295 3,222 3,749 Peru .. .. 354 220 142 172 151 203 Poland 353 404 484 488 479 443 390 188 Syrian Arab Repub .c . is 19 21 33 Uruguay 546 659 732 757 79 106 218 242 Severely indebted low-income 130 .. .. .. 1,940 1,826 .607 1.643 Moderately indebted low-income .. .. 654 ,270 1,132 ,312 1.478 1,422 Moderately indebted middle-income 9,563 9,864 10,795 10.751 8,722 8,424 9.257 12,106 Selected countries' 8,837 10,019 12.154 3,195 8,402 9,692 1 1,323 14,088 Ageria 688 742 729 567 307 298 289 287 Chile 668 625 820 667 376 624 690 1,066 China 435 582 829 1,221 438 495 537 680 Co ombia 537 613 764 749 68 291 374 561 C6ted'lvore . .. .. .. 11 100 99 115 Egypt ,, .. .. .. 416 383 339 287 Hungary .. .. .. .. 118 63 77 88 Ind a .. .. 378 97 275 417 631 538 Indonesia 1,659 1,768 1,9 6 2,353 193 317 593 742 Korea. Rep. of 775 670 848 863 712 775 662 904 Malaysia .. 282 365 475 172 150 509 295 Mexico 2,168 1,704 2.257 2.058 1,864 2.369 2,860 5,211 Nigeria .. .. .. .. 311 200 109 68 Philipp nes .. 315 481 439 144 121 165 158 Thailand 458 580 630 671 552 633 1,010 1,164 Turkey 731 1.308 1,190 1,373 1,579 1,617 1,534 1,295 Venezuela 719 831 947 787 665 839 844 629 Offshore banking centers 12.305 11,289 14,087 14,344 20,194 18,826 21,244 2 .138 Oil exporters 3,984 3,237 3,008 2,357 6,155 5,291 4,398 4,586 DRS reporters 3,281 2,834 2,654 2,052 4,13 2,942 2.157 ,970 DRS reporters 14,723 16,605 21,722 2 ,204 22,127 23,264 26.189 29,295 (tcbae can6nues on next page) NOVEMBER 1995 25 STA FISTICAL APPENDIX TABLE A.3 COMMERCIAL BANK CLAIMS ON DEVELOPING COUNTRIES, BY COUNTRY OF ORIGIN (CONTINUED) US$ millions United Kingdom' United 5totes' Country group orcountry 1990 199.° 1992Q4 1993Q4 1994Q3 1994Q4 1995Q1 1995Q2 AlI developing countries 45,560 46,495 45,689 53,300 88,328 46,669 84,716 91,972 EastAsiaand Pacific 5,017 5.956 6,066 0,100 14,746 2,541 16,547 18,343 Europe and Ceritral Asia 10,155 9,736 9,355 10,043 5,521 6,387 6,074 8,418 Latin America and the Caribbean 16,903 17,527 18,061 21,365 61,190 34,661 55,613 58,271 Middle East and North Africa 4,347 4,203 3.425 4,205 3,295 1,775 2,693 3,004 South Asia 1,700 1,698 1,814 1,775 1,705 1,747 1,725 Sub-SaharanAfica 7,084 6,766 6,832 5.766 1,871 1,305 2,042 2,211 Severelyindebtedmiddle-income 13,031 11,814 11,510 13,316 27,930 22,992 25,135 27,395 Angola 33 22 30 64 .. Argentina 2,352 2,738 2,797 3,088 10,541 9,970 0,710 10,884 Bolivia 8 6 1 7 49 85 9 1 93 117 Brazil 4.694 4,104 4,274 5,572 13,083 11,683 10, 22 ,467 Bulgaria 473 233 191 23 41 103 64 47 Cameroon 71 78 64 47 12 .. 0 8 Congo 37 39 39 41 .. Ecuador 546 514 471 474 516 593 559 638 Jamaica 68 71 76 68 55 176 157 158 Jordan 382 357 270 302 82 .. 77 58 Morocco 401 351 368 263 566 .. 473 490 Panama 1,191 1,061 1,148 1,419 638 .. 721 948 Peru 276 342 226 302 506 .. 545 556 Poland 1,279 1,188 1,000 879 343 342 312 654 Syrian Arab Republic 69 58 42 31 5 .. 2 1 Uruguay 237 185 227 251 1,309 .. 1,243 1,322 Severely indebted low-income 3,420 2,792 2,314 2,208 1,006 299 1,164 973 Moderately indebted low-income 2,527 2.770 2,592 2,652 ,704 .. 1,683 1,570 Moderately indebted middle-income 17,812 1 8,943 1 9,305 21,884 42,925 18,480 39,926 41,541 Selected countries' 18,570 19,988 19,877 25,679 51,629 15,953 50,250 52,793 Ageria 760 921 685 412 854 499 55, 574 Chile 567 704 582 729 3,643 3,848 3,698 3,924 China 1,025 1,031 942 2,369 758 .. 1,118 1,199 Colombia 643 613 647 8 0 2,520 2,760 2,777 2,845 C6te d'lvoire 247 55 162 123 47 .. 30 27 Egypt 650 594 430 726 120 .. 137 109 Hungary 330 299 268 226 341 32 339 347 Ind a 1,219 .164 1,207 1,162 1, 63 .. .328 1,243 Indones a 1,021 1.231 1,253 2,031 2,464 2,541 2,293 2,464 Korea, Rep. of 1,343 1,842 .827 2,281 5,060 .. 6,699 7,538 Malaysia 484 605 689 1,094 1,120 . 944 1,103 Mexico 4,909 5,611 5.943 7,012 21.372 .. 19,496 20,099 N geria 1,065 702 477 375 199 182 241 222 Philippines 797 717 761 885 2,377 .. 2,567 2,703 Thailand 228 424 485 1.3 0 2,967 .. 2,926 3,336 Turkey 1,142 1,134 1,053 1,658 1,600 .216 1,159 1,363 Venezuela 2,140 2,241 2,466 2,476 5,024 4,586 3,947 3,697 Offshore banking centers 28,235 25,943 24,063 47,343 26,198 .. 26,295 26,991 Oil exporters 0,864 10,096 9,793 10,161 8,999 7,261 7,223 7649 DRS reporters 8.066 7,861 7,705 6,919 6,611 5,595 5,187 5,147 DRS reporters 35,174 36,183 35,850 43,765 82,473 40,468 78.343 84,248 Not ava able, Note: This table shows the atest avai able data from each major creditor country. Recent data are not available forJapan. See country class fications at the end of this statistical appendix. a. Conso idated claims of banks and their wor dwide cperations. b. Most ofthese countries are also included in the indebted country groups. c. Partly conso idated aggregate claims of banks and their worldw de operat ons. Source: Banque de France, Bulletin Trimestrel; Deutsche Bundesbank, ZahlungsbilOnzstatistik; Banca d'italia, Bolletino Economico; De Nederlandsche Bank Quorterly Bulletin; Banque Nationale Su sse, Les Banques Suisses; Bank of England, Statistical Abstroct. Port I Federal Financial Institutions Examination Counci , U. S. Country Exposure Lending Survey. 26 FINANCIAL FLOWS AND THE DEVELOPING COUNTRIES STATISTICAL APPENDIX TABLE A.4 MATURITIES OF BANK CLAIMS ON DEVELOPING COUNTRIES US$ millons 1994Q4 More than Less than I year and less More than Estimated Short-term Country group sr courtry 1993 Total I yeor than 2 years 2 years Onallocated short-term (% of total) All developing countries 588,219 6'3,351 346,723 40,645 221 398 34,546 303,470 47 East Asia and Pacific 156,706 196 488 120,730 12,313 50,1 62 13,283 110 441 56 Europe and Central Asia 143,447 145,746 65,049 12.094 56,996 11,607 50259 34 Latin America and the Caribbean 191,957 198,267 105,4 2 7,877 78,653 6,316 96 412 49 Middle East and North Africa 51687 54,02 27.642 5,032 20,572 775 21 925 41 South As a 14,944 18,994 0,070 1,487 6,296 1r141 8,981 47 Sub-Saharan Africa 29,478 29,835 17,820 1,842 8,719 1,424 15,452 52 Severely indebted middle-income 51,353 146,592 76,147 6,202 57,837 6,406 66944 46 Angola 1,756 .568 9 9 159 414 76 685 44 Argentina 30,03 34,343 18,961 1,687 2,157 1,538 18 248 53 Bolivia 247 356 272 1 36 47 264 74 Brazil 54,068 47,588 25,340 1,422 9,078 1,748 2 1859 46 Bulgara 6,602 3,010 7 4 223 1,699 374 291 10 Came oon 1, 73 1,092 525 81 482 4 387 35 Congo 682 657 389 58 208 2 322 49 Ecuador 2,825 3,050 1,890 191 8 9 150 1 641 54 Jamaica 401 657 368 30 175 84 345 53 Jordan 1,292 1,081 667 65 292 57 574 53 Morocco 4,533 4,725 1,562 361 2,795 7 1 045 22 Panama 22,613 26,051 13,095 1,300 0,733 923 1 1758 45 Peru 2,584 3,064 2,277 49 632 106 2213 72 Poland 1 1,336 6,546 1,626 320 3,417 1,183 506 8 Syrian Arab Republic 469 467 408 8 44 7 379 81 Uruguay 3,294 3.491 2,325 52 1,102 12 2 231 64 Severelyindebtedlow-income 24,1 16 23,415 10,798 1,923 9,630 1,030 8952 38 Moderately indebted low-income 19,257 22,410 12,505 1 879 7,104 922 10.858 48 Moderately indebted middle-income 239,764 253,532 120,566 20,070 102,846 1 0,050 99,595 39 Selected countries' 305,491 353,27 195,6 4 22,85 1 5,577 19,229 174,631 49 Algeria 13,967 14,364 5,473 1,930 6,750 211 3 151 22 Chle 10,066 2,219 6,622 785 4,605 207 6 133 50 China 33,877 41,005 18,087 2,854 5,830 4,234 15 546 38 Colombia 7.479 9,980 5,058 764 3,893 265 4 486 45 Cote d'lvoire 2,1 18 2,034 1,692 61 257 24 1 632 80 Egypt 3,464 3,194 2, 1 347 707 29 1 685 53 Hungary 7,581 8,693 2,731 972 3,588 1,402 1.641 19 India 11,292 14,202 7,102 1,272 5,059 769 6,256 44 Indonesia 30,486 34d198 21,141 3,340 8,749 968 18348 54 Korea Rep. of 41,492 56,459 40,1 5 2.890 8,134 5,320 38043 67 Malaysia 13,026 13,460 6,575 839 4,822 1,224 5990 45 Mexco 55.5 8 61,731 33,025 2,086 25,329 1,291 30641 50 Nigera 3,675 3,276 1,364 374 1,485 53 944 29 Philippines 5,780 6,498 3,083 239 2,919 257 2 740 42 Thai and 29,671 43,386 30,793 2,048 9,292 1,253 28.972 67 Turkey 1 9,699 15,472 7,099 1,625 5.349 1,399 5 387 35 Venezuea 16,300 13, 00 3,543 425 8,809 323 3036 23 Offshore banking centers 532,520 599 962 493,152 14,483 74,070 18,232 480 578 80 Oil exporters 124,775 25,383 57,42 .335 54,718 1,909 44 431 35 DRS reporters 98,582 97,124 36.878 1 0,444 48,265 1 .537 25 878 27 DRS reporters 512,915 563,091 305,846 33,202 193,598 30.404 271.944 48 Note: See country classifications at the end of this statistica appendix. a. Most of these countries are a so ncuded n the indebted country groups. Soujrce: Bank for International Settlements The Matunty and Sectora, D,stnbr,tion of ntemrnotonal Bcnk Lendng. NOVEMBER 1 995 27 <~f-