What Motivates China's Overseas Lending?

Including lending by state owned enterprises, China appears to be the world’s biggest official creditor. Critics emphasize its lack of loan transparency. Some accuse China of using loans as tools to gain political or even territorial control. Are such criticisms fair? And what really motivates China's overseas lending. Pippa Morgan (Duke Kunshan)is a specialist in the political economy of China's foreign economic relations and joins us to talk about these questions.

Producer: Leanna Doty

Do Investors Care About Odious Debts?

The Tsarist Russian government used borrowed funds to repress domestic political movements. Vichy France borrowed while collaborating with the Nazis. King Leopold used borrowed funds to engage in horrific exploitation and repression in the Congo Free State, and these debts were later assumed by Belgium. There are nearly endless examples of truly odious sovereign debts. Do investors care about any of this? And if so, why? Our guest Kim Oosterlinck (Universite Libre de Bruxelles; Solvay Brussels School of Econ. & Mgmt.) is perhaps the foremost expert on such questions. We talk with Kim about odious debt, with a sidebar on efforts to recover looted art.

Producer: Leanna Doty

Haiti’s Odious "Independence Debt"

In 1825, France imposed on Haiti an indemnity obligation of 150 million francs, ostensibly to compensate French plantation owners for Haitians having fought for and won their freedom in the revolution two decades prior. Haiti assumed this vast debt with French gunboats lurking just offshore, and all parties understood that it could not be repaid without massive borrowing from French (and later U.S.) banks. It would be well into the 20th century before Haiti retired these debts. The Haitian independence debt was odious and unjust. But was it illegal at the time? And if so, does Haiti have an avenue to recover from France? We discuss these questions, and legal history more generally, with legal historian Julia Rudolph of North Carolina State University.

Producer: Leanna Doty

Covid (and Other) Contingencies

We close out 2020 with all-star guests Lee Buchheit, Joyce Chang, and Jeromin Zettelmeyer to discuss contingent debt instruments. Many economists extol the virtues of GDP-linked bonds, but investors are wary. Is caution appropriate? And what about the biggest modern contingency: the risk that COVID-19 will cause more economic harm than expected? Even in normal times, governments often receive less debt relief than they need, leading to multiple rounds of restructuring. We talk about the "COVID codicil" as a potential solution to this problem. Should investors fear or welcome it?

Producer: Leanna Doty

Restructuring Uncle Sam's Debt

All together now (in a smarmy drawl): "Families must balance their budget, why not countries?" Okay, that's a stupid thing to say (although politicians love to say it). It's especially stupid to say about rich countries that borrow in their own currency. But this doesn't mean these countries can't or won't default, as the United States itself has demonstrated. We talk with Julia Mahoney and Ed Kitch (Virginia), whose recent article (link below) covers the history of U.S. debt default and argues provocatively that a debt restructuring might be needed, perhaps surprisingly soon. And no, the 14th Amendment doesn't prohibit this. Julia and Ed explain why.

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3492085

Producer: Leanna Doty

Best Crisis Management in HISTORY!

Felix Salmon (Axios; Slate Money) knows more about financial markets than pretty much anyone we know. He joins us to talk about the U.S. government's engagement (or lack thereof) with debt issues in emerging markets and with multilateral institutions like the IMF. Will things be different under a Biden administration? Also: what just happened with that lawsuit against Guatemala?

Trees. Wrong. Barking Up.

Jeromin Zettelmeyer has done foundational research on the economics and the law of sovereign debt. We discuss the G-20's "Common Framework," recently released to lay out a mechanism for coordinating debt relief to poor nations. Jeromin explains why Mitu and Mark are critical of the wrong aspects of the Common Framework and highlights the significance of the G-20's announcement.

Producer: Leanna Doty

A View From the Sell Side

Our guest Siobhan Morden is one of the most respected and widely-read sell-side analysts in the sovereign debt markets. We ask Siobhan about the process of assessing country risk and for insight about what to expect given the continuing economic fallout of the pandemic.

Producer: Leanna Doty

Why Not Use GDP-Linked Bonds?

Yannis Manuelides heads Allen & Overy’s Sovereigns and International Institutions practice group and has played a key role in shaping the legal terms of sovereign loan contracts, including the template for GDP-linked bonds. We talk with Yannis about why governments have been reluctant to use GDP-linked bonds and about different drafting practices in London and New York. We also chat (skeptically) about the so-called “common framework” to deal with the Covid-induced crisis in the sovereign debt world.

Producer: Leanna Doty

Judgments 1, CACs 0

If a bondholder sues and gets a judgment before a sovereign can restructure its debt, does the bondholder escape the restructuring? If so, will countries like Venezuela--which can't restructure any time soon and is increasingly a target of litigation in U.S. courts--be left without restructuring tools? Federal courts guru Andy Hessick (UNC Law) patiently explains why a restructuring vote under a collective action clause has no effect on a judgment. But governments needn't worry. There are plenty of other tools at their disposal.

Producer: Leanna Doty