21976Vol. 1 No.2

-FINANCIALF-LOWS AND THE

-DEVELOPIN h

[WOU-NTRIESA WORLD BANK QUARTERLY

February 1994 FIE COPY

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CO41 ENTS AND SUMMARY

INTERNATIONAL LENDING EQUITY PORTFOLIOAND CAPITAL MARKETS AND FOREIGN DIRECT

INVESTMENT* DEVELOPING-COUNTRY

BORROWING PAGE 4 m EMERGING STOCK MARKETS PAGE 12

Developing countries raised $18.6 billion The IFC's dollar-based composite price indexthrough bonds and loans in the third quarter rose an impressive 37 percent in the fourthof 1993, up 16 percent on the second quar- quarter, led by especially strong Asian stockter. Bond issues surged to a record $19.7 bil- markets. Foreign investors, particularly USlion in the last quarter of 1993, and to $58 mutual fund managers, seeking high yieldsbillion for the whole of 1993. Spreads contin- fueled prices and trading volumes in someued to tighten, even as maturities lengthened. markets.Mexico's national oil company, Pemex, issuedthe first 30-year bond by a developing coun-

try. Emerging-market borrowers were active in AND ERITIES PAGEU1S

the eurobond and Yankee markets, and LatinAmerican borrowers tapped the yen market The stream of Asian euroconvertibles contin-with five issues. The Congo issued its first euro- ues, thanks to strong foreign investor demandbond, securitized by oil receivables. sparked by robust equity markets and local

firms' capital raising. Asian funds are popu-lar with investors, and the first Russian equity

* G;LOBAL BORROWING PAGE 8 fnwaluchdinvestment fund was launched.In the third quarter of 1993, $202.1 billion wasraised in international capital markets as in-

terest rates fell to record lows. At $116.3 bil- * FOREIGN DIRECT INVESTMENT

lion, bond issues were up 9 percent over the AND PRIVATIZATION PAGE 16second quarter. Lending slowed, but spreads A survey of Japanese firms shows an increas-on international bank loans tightened for the ing number of local firms planning overseasfirst time in years. Equity issues continued to investment. The elimination of FDI restric-increase. tions under NAFTA and the reduction of tar-

iff and nontariff barriers are expected to in-crease Mexico's attractiveness to investors.

* COMMERCIAL BANK CLAIMS PAGE 9

In the second quarter of 1993, cross-borderclaims of BIS reporting banks (including lo- SECONDARY MARKETScal foreign currency lending) fell by $116.3 FOR DEVELOPING-billion, a near-record decline. Fourth-quarter COUNTRY DEBT PAGE 17

lending to developing countries slowed onlower borrowing in Asia. A widening base of investors seeking high

returns, as well as favorable developments-such as the passage of NAFTA in the US Con-gress-buoyed secondary market debt prices.

Rating activity is increasing as more emerging- Bulgaria's debt deal took the market by sur-country borrowers enter international capital prise, and fueled the increase in pre-Brady andmarkets. In the fourth quarter, Moody's up- exotic debt prices. In the fourth quarter, Latingraded some Chinese financial institutions, eurobonds outperformed both the US stockand Uruguay received a first-time rating. and the US government bond markets.

2 FINANCIAL FLOWS AND THE DEVELOPING COUNTRIES

CONTENTS AND SUMMARY

OFFICIAL FLOWS: quarter of 1993. Struggling with portfolio

MULTILATERAL AND problems,Japanese banks took the unusual

BILATERAL step of writing off bad loans.

9 MULTILATERAL FLOWS PAGE 19

An enlargedEnhanced StructuralAdjustment FINANCIAL B RI EF:Facility (the IMF's concessional lending facil- FINANCING FOR EI G Nity) is expected to be operational by the end DIRECT INVESTMENT PAGE 21

of February 1994. The World Bank's largest

project loan ($610 million to rehabilitate Foreign direct investment flows to developing

Russia's oil sector) was approved for disburse- countries have reached unprecedented highs,

ment. The Multilateral Investment Guarantee but the method of financing these investments

Agency doubled the investment insurance is changing. Equity investments have gained

coverage it provides. in importance, while the share of reinvested

earnings in total FDI has fallen.

* BILATERAL ODA AND EXPORT eoIternatbkforRi

CREDITS PAGE 19 STATISTICAL APPENDIX

In the fourth quarter of 1993, the Export- *o T DEBT.,, TOTAL-EXTERNAL DEBT PAGE 24

Import Bank of Japan approved about $650

million in new untied loans and guarantees. a AGGREGATE NET LONG-TERMRESOURCE FLOWS PAGE 25

M BANK AND TRADE-RELATED

DEBT RELIEF UPDATE NONBANK CLAIMS PAGE 26 4

* COMMERCIAL BANK CLAIMS OCX,* OFFICIAL CREDITORS PAGE 19 UPAGE 27 '

ON DEVELOPING COUNTRIES I&E2 Y 5,>'

In the fourth quarter, Paris Club creditors * COMMERCIAL BANK CLAIMS

rescheduled Viet Nam's debt service arrears ON DEVELOPING COUNTRIES,

on enhancedToronto terms. InJanuary 1994, BY COUNTRY OF ORIGIN PAGE 28

Kenya's debt service arrears were also resched- * MATURITIES OF BANK CLAIMS

uled. ON DEVELOPING COUNTRIES PAGE 32

* FUNDS RAISED ON INTER-

* COMMERCIAL CREDITORS PAGE 20 NATIONAL CAPITAL MARKETS PAGE 33

In the fourth quarter of 1993, Bulgaria PRICES PAGE 34

reached an agreement in principle on restruc-

turing commercial bank debt, and Jordan I NET FOREIGN DIRECTINVESTMENT FLOWS

concluded a Brady-style debt reduction agree- TO DEVELOPING COUNTRIES PAGE 35

ment.• EMERGING STOCK MARKETS PAGE 36

* COUNTRY GROUPS PAGE 37

COMMERCIAL BANKPROVISIONING ANDCAPITAL ADEQUACY PAGE 21

A continuing improvement in asset quality

boosted US bank profitability in the third

FEBRUARY 1994 3

INPTERNATIONAL LENEeDCS :\NF.) _AFAL MARKETS

DEVELOPING-COUNTRY TABLE2

BORROWING BOND ISSUES BY TYPEOF BORROWERUS$ mi;laons

U IN THE THIRD QUARTER, DEVELOPING 1993 1993

COUNTRIES RAISED $18.6 BILLION IN 1992 1993 Q3 Q4

MEDIUM- AND LONG-TERM DEBT Ali developing countries 21,245 57,698 13,032 19,652

Private 9,771 21,004 4,543 8,278According to the OECD, developing coun- Sub-Saharan Africa 73 0 0 0tries raised $18.6 billion in international EastAsiaand Pacific 2,121 4,797 1,010 2,313

South Asia 0 556 75 481bond and loan markets in the third quarter Europe and Central Asia 65 290 140 0

Latin America 7,512 15,362 3,318 5,484of 1993, more than twice the levelsayear ago; MiddleEastand North Afrca 0 0 0 0at nearly 70 percent, bond issues outstripped Sovereign 5,761 20,258 4,812 5,130bank credit. For Latin America, which raised Sub-Saharan Africa 315 0 0 0

East Asia and Pac,fc 300 907 288 300$7.6 billion, the share of bond financing re- South Asa 0 0 0 0mained high at 79 percent. Of the $6.3 bil- EuropeandCentra Asia 4,446 15,115 2,916 3,437

Latin America 700 4,236 1,608 1,394lion raised by Asian countries, however, most Middle East and North Africa 0 0 0 0

($3.7 billion) was bank loans. Borrowing by Other public 5,7 13 16,435 3,677 6,244

Central and Eastern Europe was $2 billion, Sub-Saharan Afrrca 336 0 0 0EastcAsia and Pasefc 2,818 8,085 1,204 3,537

compared with only $309 million in the sec- South Asia 0 0 0 0

ond quarter. Europe and Central Asia 123 894 461 1,568Latin America 2,435 7,456 2,011 1,139Middle East and North Africa 0 0 0 0

* IN THE FOURTH QUARTER, DEVELOPING

COUNTRIES ISSUED A RECORD $19.7

BILLION OF DEBT retail investors, and, increasingly, insurance

Developing-country borrowers issued record companies and pension funds.debt in international capital markets in the Issue volume was up 60 percent in the lastfourth quarter as global investors sought geo- quarter of 1993 (from about 90 issues in thegraphical diversification and high-return in- preceding quarter) as developing-countryvestments. Demand came from a broad range borrowers were increasingly attracted to inter-of investors, including mutual fund managers, national bond markets by the low cost of rais-

ing funds. Private borrowing virtually doubledTABLE IINTERNATIONAL BORROWING BY SELECTED DEVELOPING (to$8.3 billion), and public sectorbondissuesCOUNTRIES were up 70 percent. Sovereign borrowing alsoUS$5 mitlons

U99$ Im992l99iQnsI rose, but at a slower pace. Argentina and Ko-County1Total9Bonds9Total1Bonds Total Bonds Total 3 Bones rea topped the bond issue league table ($3 bil-

Argentna - 7500 750.onds0 I -_ B -Bonds lion each), closely followed by Brazil andArgent na 70~O 750.0 1529,2 1 .529.2 531.0 53 .0 2.092.1 ,716.1

Brazil 1,479.6 1,461.6 3,010.0 2,830.0 1,624.0 1,595.0 1.850.0 1,550.0 Mexico. At almost $10 billion for the year,Chile .. .. 350.0 .. 332.6 332.6 342.0China 2,595.1 263.0 4,043.2 1,273.2 I,836.2 753.6 1,794.1 1,021 .3 Mexico was the biggest bond issuer.Czech Republic' 278.3 278.3 39.5 15.5 . .. 327.6 327.6 Elsewhere, Hungary raised $1.9 billion inHungary 1,378.3 1,237.8 1,446.1 1,234.8 280.5 278.4 1,33 .3 1,301.3India 225.6 225.6 200.6 .. .. .. 55.0 125.0 the fourth quarter and $4.8 billion for theIndonesia 5,638.5 406.1 2,641.2 611.0 773.0 500.0 835.9 wholeofl993.TheNationalBankofHungaryKorea, Rep. of 6,436.7 2,789.5 5,204.0 3,181.6 1,892.5 1,140.0 1,228.4 939.4Malays a 512.0 290.2 I,270.6 .. 393.5 .. 479.1 .. issued its third DM 1 billion eurobond in theMexcac 5,574.0 2,149.5 3,373.6 2,923.4 3,663.6 3,263.5 1,214.8 1,214.8 fourth quarter. Borrowing by China, whichPakistan 96.0 . . . .

Poland 4.7 . 8.7 .. .. .. .. .. continues to diversify its funding sources,Tha;land 1,907.2 96.4 2,718.3 646.1 1, 31.8 433.8 1,701.3 453.0 slowedinthefourthquarteronaccountoftheTurkey 2,279.5 639.8 4,579.9 2,777.1 1,344.2 559.7 919.9 579.9Venezueia 581.3 581.3 1,035.4 830.4 457.4 307.4 2,068.3 1,498.3 country's efforts to dampen credit growth.Z;Xnbabwe 170.0 .. 15.0 . . . . .

-:mbbw II5.:Colombia entered the international bondNot avai able.

Note: Bonds ncIude both internatonal ssues (in euromarkets) and traditonal foreign issues. markets in April 1993 for the first time, anda. Data before Apri 1993 refer to Czechoslovak a.Source: OECD, Financiol Statistics (monthly), December 1993. the fourth quarter saw two new issues, includ-

4 FINANCIAL FLOWS AND THE DEVELOPING COUNTRIES

-Ni ~2LAN'Di4G AND CAPITAL MARKETS

ing a three-year, $100 million debut offering November. The $250 million 144a deal (part

by the state-owned energy development bank, of a $500 million EMTN program) was priced

Financiera Energetica Nacional, at a launch at 220 bp over comparable US Treasuries and

spread of 215 basis points over comparable US was oversubscribed, with demand mainly from

Treasuries. Demand was mainly from retail institutional investors.

investors in Europe and the United States. Brazilian corporations, aided by put op-

After an absence of several months, Indone- tions, stretched out the yield curve for the

sia returned to the international bond mar- country's paper with their first 10-year issue.

kets with three issues (totaling $455 million) Celulose Nipo-Brasiliera's $200 million bond

in the fourth quarter. The Philippines also had a five-year put and a spread of 375 bp over

made three issues (of $455 million in total) comparable US Treasuries. Demand was

in the fourth quarter. And following its mostly from Japan-hardly surprising, since

euromarket debut in 1992, Trinidad and To- Cenibra has a joint venture with Japanese

bago returned with a $125 million, seven-year paper companies. Brazilian entities also of-

bond with a five-year put option; it was priced fered two long-tenor deals with eight-year

to yield 495 bp over US Treasuries (the previ- maturities. Klabin Fabricadora de Papel e

ous deal was for $100 million at 565 bp over Celulose issued a $60 million bond with a

Treasuries). Investor demand was mainly from put option at five years and a launch spread

Europe, the United States, and Latin America. of 475 bp over comparable US Treasuries.

Metalurgica Gerdau offered an eight-year,!'MATURITIES LENGTHEN, WITH THE FIRST $100 million issue with put options at three

30-YEAR ISSUE OUT OF MEXICO AND THE andfiveyearsandayieldspreadofs00bpoverFIRST 10-YEAR DEAL FROM BRAZIL Treasunes.

Maturities on developing-country issues con-'NBORROWING SPREADS TIGHTEN ON HIGH

tinue to lengthen, averaging nearly seven years _RRin the fourth quarter and five and a half for INVESTOR DEMAND, AND NAFTA SQUEEZES

all of 1993. Several bonds had maturities of SPREADS ON MEXICAN DEBT

10 years or longer. On the back of strong de- Despite a dramatic leap in issues, borrowing

mand for Mexican paper, Petroleos spreads on bonds continued to tighten in the

Mexicanos (Pemex) successfully launched the fourth quarter. New investors seeking to boost

first 30-year Latin American eurobond in portfolio returns entered the market, helping

to lower average issue spreads (on dollar-

CHART I denominated issues) to about 280 bp overBOND ISSUES FROM DEVELOPING Treasuries, substantially below the average ofCOUNTRIES, BY MATURITY 340 bp at the beginning of the year. BrazilianUJS$ billions

19.7 issuers have seen spreads narrow by 170 bp

O Over 15 years since the beginning of 1993, and launch spreadsLI I1-15 years on Argentine issues have fallen by more thanLI 6-lO years 120 bp. By contrast, spreads on Venezuelan

11.2 1-5 years issues rose nearly 150 bp in the fourth quarter,to the same level as in the first quarter.

The passage of NAFTA squeezed spreads

on Mexican debt, prompting investors to look

for other high-yield alternatives. Secondary

market spreads on Mexican eurobonds nar-

rowed by nearly 30 bp, and, as traditional in-1993QI 1993Q2 vestors in Mexican bonds sought other high-

Source. Euromoney Bon ,ware and World Bank dat y eld nvestments, Argentme borrowers

'E PLJ'A Y I 994 5

INLRlNAUTO.NAL LENIDING AND CAPITAL MARKETS

appear to have benefited. Not only were Ar- market. Telebras's three-year, Y20 billiongentine borrowers able to almost double bor- eurobond had a spread of 416 basis points overrowings in international bond markets, but Japanese government bonds. Demand wasthey did so while narrowing spreads and split evenly between Europe and Asia, withstretching maturities. participation from retail as well as institutional

Floating-rate issues rose as investors ex- investors. Also in the fourth quarter, Brazil'spected US interest rates to rise with a strength- Petrobras accessed the euroyen market withening US economy. The share of these issues a Y21 billion issue.in total bond issues climbed to 10 percent Elsewhere, the Malaysian state-owned oilfrom 2 percent in the third quarter. company, Petronas (rated AA- by the Japan

The first Latin American investment-grade Bond Research Institute), launched its firsteurobond was issued by a Chilean shipping Y50 billion, 10-year issue, which was priced tocompany, Compania Sud Americana de yield 35 bp over LIBOR. The National BankVapores. The launch spread of 170 bp over of Hungary entered the yen market for thecomparable US Treasuries was one of the low- fourth time in 1993, bringing the total fundsest for a Latin borrower. Most of the $100 mil- raised to Y190 billion for the year. The latestlion issue was placed with US pension funds offering was a 10-year, Y50 billion issue, pricedand insurance companies. to yield 174 bp over LIBOR.

M LATIN AMERICAN YEN ISSUES RISE AS M BECAUSE OF THE DEPTH OF THE YANKEE

JAPANESE INVESTORS SEEK HIGH YIELDS, MARKET, EMERGING-MARKET ISSUERS ARE

BUT THE INVESTOR BASE IS SMALL TAPPING IT MORE OFTEN

Japan's big commercial banks and insurance Thanks to the possibility of longer maturitiescompanies are reluctant to invest in Latin and larger issue size, emerging-market bor-paper; Japanese regional banks and credit rowers are increasingly turning to the Yankee

CHART 2 unions are not. Their demand for high-yield market. Argentina tapped the market twice inCURRENCY yen-denominated Latin paper is a response to thefourth quarter. Banco de GalicialaunchedCOMPOSITION OFBOND ISSUES, slow borrowing by local corporations due to the firstArgentine Yankee issue, with a 10-year,1993 Q4 the weak domestic economy, low rates onjapa- $200 million bond priced to yield 365 bp over

Latin America nese government bonds, and a strong and comparable US Treasuries. The bonds have aOthers 2% Yen rising yen that has resulted in losses on for- call option at the end of five years, and more

Or 2 DM 1 % eign currency securities. This interest in high- than 95 percent of the issue was placed withyield Latin paper is giving good-quality Latin US institutional investors. Banco Rio de laborrowers the opportunity to tap new fund- Plata, Argentina's biggest commercial bank,

US dollars 87% ing sources, previously open only toAAA-rated followed with a 10-year, $250 million Yankeesovereigns and multinationals. that set a new benchmark for 10-year deals

Other developing regions Following the United Mexican States' Y10 from the private sector. It was oversubscribedOthers 6% billion Samurai issue lastJuly, two other Mexi- and had a spread of 299 basis points over Trea-vN\Yen 28% can borrowers (Nacional Financiera and suries.

Banco Nacional de Comercio) have come to Korean entities continued to borrow in theUS dollars 56% the market. The Republic of Colombia made Yankee market in the fourth quarter, raising

-YDM 10% its debut in the yen bond market in Decem- about$2 billion. The mostrecentofferingwasber, with a '10 billion, five-year deal. Pricing a $400 million dual-tranche issue. The five-

Source: Euromoney Bondware and Worl Sank data. was aggressive at 130 bp overJapanese govern- year, $200 million tranche was priced at a

ment bonds. Brazil's Telebras was the first spread of 74 bp over comparable US Treasur-Latin American borrower to tap the now de- ies; the 12-year tranche was priced at 98 bpregulated euroyen market, which allows non- over Treasuries. Elsewhere, the National Bankinvestment-grade issuers to participate in the of Hungary launched two $200 million deals

6 FINANCIAL FLOWS AND THE DEVELOPING COUNTRIES

IT ERNA! [ONAL. '_ENiNG AND CAPITAL MARKETS

back to back, both at a launch spread of 255 placed under Rule 144a), was strong.

bp over comparable US Treasuries. The National Bank of Hungary, which has

Mexican borrowers are also tapping the borrowed in several markets, made its debut

Yankee market with increasing frequency. in the Matador market with a five-year PtaO 0

Tolmex, a subsidiary of Cemex, issued a $250 billion issue priced to yield a spread of 225 bp

million, 10-year Yankee, increased from its over Bonos.

original $200 million. The bonds were priced

to yield 298 basis points over comparable US B ARGETIATIS THEFIR L

Treasuries. Mexico's Transportacion Mari-

tima Mexicana issued a seven-year, $150 mil- Global bonds appear to be gaining in popu-

lion Yankee bond at a launch spread of 360 larity. Investors are attracted by the liquidity

bp over Treasuries. of globals and borrowers by the savings in

funding costs. The World Bank introduced

DKOREAG BOOSTS MASIA' FLEDGLING the concept of the global bond in SeptemberDRAGON BOND MARKET 1989 with a $1 billion issue. Unlike eurobonds

Asia's nascent Dragon bond market, which and international bonds, global bonds are is-

received a boost with a $300 million, 10-year sued simultaneously in the United States,

issue by China in October 1993, is attracting Europe, and Asia, allowing trading within and

other emerging-country issuers. Korea's across major financial markets. Globals tend

Samsung Corporation issued a five-year, Y1O to be large, liquid, and actively traded.

billion Dragon bond, a first for an Asian cor- Following several large global bonds issued

poration. The Dragon marketwas established by established (industrial-country and supra-

in 1991 to help develop a regional capital national) borrowers in 1993, Argentina en-

market (outside ofJapan) for Asian borrow- tered the market with a $1 billion bond offer-

ers and investors. At present, the investor base ing in December. The 10-year, $1 billion issue

is narrow, dominated largely by central banks, (raised from $750 million) was the first glo-

which are not active in the secondary market. bal from a Latin American entity and the first

The Dragon bond market is likely to be helped Argentine bond with a 10-year maturity. The

by Hong Kong's introduction of a Central bond was priced at a launch spread of 280 bp,

Moneymarkets Unit, the first securities clear- setting a benchmark for other 10-year issues.

ing system for the Asian region. Most of the bonds were placed in the United

States, although demand from Europe and

THE EMERGICANG-M ANDLARKOECORS RENTR Asia, includingJapanese investors, was strong,THE EURO-CANADIAN DOLLAR SECTOR AND reflectingArgentina's growing acceptance in

international capital markets.

For the second time in two years, a Mexican In January, Mexico's Bancomext also

borrower (Pemex) has issued a Canadian launched a global bond. The 10-year, $1 bil-

dollar eurobond. Pemex, one of the most in- lion bond had a launch spread of 163 bp over

novative emerging-market borrowers, entered comparable US Treasuries. More than 60

this market at a time when a pickup in yield percent of the issue was reportedly purchased

spread versus the US dollar sector has en- by US investors.

hanced the popularity of the Canadian dollar In November, a $1.35 billion, 10-year glo-

sector. The C$100 million (US$77 million), bal bond was issued by Korea Electric Power

five-and-a-quarter-year issue was priced at a Company, at a launch spread of 90 bp over

launch spread of 195 bp over comparable comparable US Treasuries. The issue, a refi-

Canadian Treasuries. Demand from Euro- nancing, was to enable the power company to

pean institutional and retail buyers, as well as diversify its investor base. About 40 percent of

from the United States (where the bonds were the bonds were placed in the US.

FEBRUARY 1994 7

N-TERNATCONAL LENDING PAND CAPITAL MARKETS

a THE CONGO GAINS ACCESS TO INTER- * LOCAL BOND MARKETS OFFERNATIONAL CAPITAL MARKETS, AND COSTA INTERNATIONAL INVESTORS HIGH YIELDS

RICA RETURNS TO THE EUROBOND MARKET Foreign investors have been increasingly at-

InJanuary, the Republic of Congo went to the tracted to local bond markets (denominatedeurobond market for the first time with a 10- in local currencies) in some emerging coun-year,$600millionissuebackedbyreceivables. tries. The most popular domestic fixed-The bonds will be redeemed quarterly from income markets are those in Mexico and Ar-oil drilling royalties paid by Agip, an Italian gentina. Mexican bonds offer high interestoil company. Although the bonds carry sover- rates (the outcome of a tight monetaryeign risk, the receivables provide a credit en- policy), and the credibility of the peso's ex-hancement that helped the Congo to gain change rate band has lowered short-termaccess to the market. currency risk. Although the yield on Mexican

In January, too, Costa Rica's state-owned Cetes fell in 1993, from a high of 18.5 per-energy and telecommunications company, cent in May to 8.7 percent in December, theInstituto Costarricense de Electricidad, issued yield is still well above that of US Treasurythe country's first eurobond in more than 13 bills. As of end-September, more than $19years. The three-year, $50 million issue was billion was invested in Cetes (70 percent heldpriced at 395 bp over comparable Treasuries. by foreigners) and about $11 billion in longer-In another first, a Slovakian corporation, term government bonds, or AjustobonosCalex, launched a three-year, $21 million (55 percent held by foreigners). Unlike pri-eurobond, with a launch spread of 325 bp over vate sector notes, government bonds are tax-Treasuries. free, increasing their attractiveness to foreign

In the Czech Republic, a leading bank, investors.Zivostenska, issued a koruna-denominated Argentina's bond market is dominated bybond with an international tranche (three restructured government debt, which is ofyears, $35 million), which allows foreign in- longer maturity than Mexican governmentvestors to convert principal and interest pay- debt. Although the Bonex 89 ($3.2 billionments into hard currency. The bonds, with a outstanding at end-September) has tradition-put option after two years, were purchased by ally been favored by foreign investors, Boconesinvestors in the United States and Europe. ($5.3 billion outstanding at end-September)

were popular in 1993 because they could beCHART 3 used to buy shares in the privatization of theUS DOLLAR RETURNS IN SELECTED LOCAL MARKETS, 1993 national oil YPF.Annual percentage yield company,

91- d Venezuelan ZCB GLOBAL BORROWING

20, , S * INTERNATIONAL CAPITAL MARKETS91_-day Mexican Cetes REBOUNDED IN THE THIRD QUARTER

According to the OECD, $202.1 billion wasArgentine Bonex 89 raised in international capital markets in the

third quarter of 1993, bringing the total foro ..... . .. / t (the first nine months close to that for the

3-month US whole of 1992. Gross bond issues were $116.3Treasury bill rate. Treasury bill rate billion, up 9 percent over the previous quar-

X___________________ *_________ _ ____ _ ter and a year-on-year increase of almost 50percent. At $98.9 billion, fixed-rate bonds

Source: VestCorPartnem. slipped to 85 percent of all bond issues.

8 FINANCIAL FLOWS AND THE DEVELOPING COUNTRIES

INTERNATIONAL LENDING AND CAPITAL MARKETS

Medium-term note facilities were higher in the TABLE 3

third quarter. INTERNATIONAL CAPITAL MARKET FLOWS

As in earlier quarters, issues were supported US$ bilons

by low interest rates, as well as large borrow- Instrument 1990 1991 1992 1993Q1 1993Q2 1993Q3Bonds 229.9 297.6 333.7 140.0 107.1 116.3

ing requirements of sovereign governments Equities 7.3 23.4 23.5 5.0 8.8 10.7

to finance fiscal deficits. Borrowers sought to Syndicated oans 124.5 116 17.9 25.4 48.8 34.2Note issuance fac lit es and other

lock in interest rates in the expectation that backup facilties 7.0 7.7 6.7 0.7 3.6 3.5

the interest-rate cycle had bottomed and long Eurocommercia papers and othernonunderwritten facilities 66.2 80.2 127.9 40.6 21.9 37.4

rates were likely to edge up. But expectations TotTotal ~~~~~434.9 524.9 609.7 211.7 190.2 202.1

of an upswing in rates prompted investors toFlows to develop ng countiesa (percent) 7.6 9.1 8.0 7.0 7 0b 8.01

shift toward floating-rate notes; while the a IncudingEastern Europeancountnes.

amount of those issues reached the highest b Est mate.Source: OECD, Fmnonol Morket Trends.

level since 1986, the amount of fixed-rate US

dollar issues fell. Investors also sought higher new lending to generate revenues. Demand

yields by shifting into longer maturities. from blue chip borrowers is still low because

Appreciation of the yen in the third quar- of protracted weakness in the world economy,

ter and expectations of even lower rates drew fewer international mergers and acquisitions,

investors into the euroyen and Samurai sec- and cost-effective financing alternatives in the

tors. Indeed, the share of these markets in total securities markets. Thus spreads have nar-

international bond issues was up sharply, at rowed. The OECD reports that average

13 percent. Deutsche mark issues were helped spreads in January-August 1993 were 80 bp,

by investors moving to safe-haven currencies compared with 85 bp in 1992. Maturities have

in response to pressures in the ERM. The shortened, however, atfouryears, five months

French franc share of all issues nearly halved (in the first eight months of 1993), compared

to 7 percent, but other European currencies with five years, nine months in 1992.

gained market share. Although the US dollar

sector lost some market share (39 percent), it

was still the most popular currency of issue. THE THIRD QUARTER, BOOSTED BYPRIVATIZATIONS

* SPREADS ON INTERNATIONAL BANK LOANS International issues on industrial-country

EASED FOR THE FIRST TIME IN FOUR YEARS stock markets continued to climb-equity is-

After posting strong gains in the second quar- sues were $10.7 billion in the third quarter,

ter, syndicated lending fell to $34.2 billion compared with $8.8 billion in the previous

globally in the third quarter. The share of quarter and $23.5 billion for the whole of

bank lending in total financing slipped to 17 1992. Behind the increase were privatization

percent, thanks to the lower refinancing needs issues (accounting for 28 percent of the total

of US corporations and the weak economies in the first eight months of 1993) and initial

of many major industrial countries. Lending public offerings by US corporations.

to developing Asian economies continued at

a modest pace, with this region accounting foralmost 20 percent of new lending. COMMERCIAL BANK CLAI MS

Bank lending spreads are beginning to ease

because of several factors. As banks have over-

come balance sheet problems and completed REPORTING BANKS' CROSS-BORDER CLAIMS. . SAW A NEAR-RECORD DECLINE

retrenchment, they are in a better position to

undertake new lending. Moreover, banks' In sharp contrast to international securities

loan portfolios, built up five to seven years ago, issues, cross-border and local foreign currency

are maturing, and banks are now looking for claims of BIS reporting banks fell by $116.3

FEBRUARY 1994 9

'NTERNA1 -C NAL LENDING AND CAPITAL MARKETS

billion in the second quarter of 1993, just a BIS banks' claims on China rose by $3.7 bil-shade short of the largest-ever decline in the lion in the second quarter as its trade accountsecond quarter of 1991. Net international shifted to deficit. Lending to Thailandwas alsobank credit (or new lending), adjusted for strong, and claims rose by $2.5 billion, com-redeposits, was higher by an estimated $40 pared with a rise of $648 million in the previ-billion, compared with $60 billion in the first ous quarter. Other Asian countries, such asquarter. Syndicated credit facilities also re- Korea and Malaysia, also borrowed substantialceived a boost as US entities borrowed to refi- amounts. By contrast, claims on India and thenance existing debt. Philippines fell for the second consecutive

International claims of Japanese banks quarter.(unadjusted for exchange rate changes) fell Reporting banks' claims on Latin Americaby more than $29 billion. Provisioning for were sharply lower as Argentina reduced itsnonperforming loans and boosting capital debt to these banks by a record $3.9 billionprompted Japanese banks to further scale through the conclusion of its Brady-style debtback activity in this market. Indeed, they have reduction agreement. Claims on Brazil andseen a 30 percent contraction in their inter- Mexico, however, continued to grow. At $3.2national assets (on an exchange-rate-adjusted billion, the decline in claims on OPEC coun-basis) since end-1990 and a seven-percentage- tries was also large. While claims on the formerpoint slide in their share in BIS reporting Soviet Union increased by $757 million be-banks'international assets. French banks also cause of a rise in interbank credit, banks'saw a big decline in claims, due to an easing claims on Eastern Europe fell slightly. Theof pressure on the French franc. German $183 million decline in claims on Hungary wasbanks' claims, however, were up almost $16 due to its obtaining financing in the securi-billion, and US banks' claims were $11.6 bil- ties markets. Claims on Africa were also slightlylion higher in the second quarter. BIS banks lower, indicating little new lending activity.continued to scale back interbank business The withdrawal of funds from the BIS re-with nonrelated establishments. porting banks by developing countries contin-

ued at a high level, with deposits from non-3* BIS BANKS' EXPOSURE TO DEVELOPING OPEC developing countries falling by $9.8COUNTRIES ROSE IN THE SECOND QUARTER, billion. Deposits of Chinese residents dippedTHANKS TO CONTINUED LENDING TO ASIA.. by a further $2 billion, but Malaysian residentsBIS banks' outstanding claims (adjusted for builtup depositsby$1.1 billion. Depositsfromexchange rate changes) on non-OPEC devel- OPEC residents fell by another $5.5 billion,oping countries, OPEC, and Eastern Europe continuing the trend of the previous quarters.and the former Soviet Union rose by $822 Deposits from the former Soviet Union con-million in the second quarter of 1993, com- tinued to build, growing by $2.2 billion in thepared with a $4.5 billion increase in the first second quarter.quarter. The smaller rise was due almost en-tirely to a fall ($3.2 billion) in claims on OPEC * FOURTH-QUARTER LENDING TO

countries. Claims on non-OPEC developingcountries rose by a further $4.1 billion, follow- Syndicated lending activity slowed in theing a $2.9 billion first-quarter rise. The decline fourth quarter, on lower borrowing by Asianin BIS banks' claims on Eastern Europe and entities. Bank lending activity continues to bethe former Soviet Union was halted in the focused on Asian economies, although bor-second quarter. rowing by residents from China and Thailand

Lending to Asia's major developing coun- was below earlier periods. Korea and Indone-tries rebounded in the second quarter. After sia, however, borrowed large amounts duringa decline of $3.9 billion in the first quarter, the fourth quarter.

10 FINANCIAL FLOWS AND THE DEVELOPING COUNTRIES

INTERNATIONAL LENDING AND CAPITAL MARKETS

Bank lending to other regions remained tion Bank were upgraded from Baal to A3. TABLE 4

low. In Eastern Europe, the National Bank of The improved ratings reflect the close rela- SOVEREIGN FOREIGN

Hungary returned to the international syndi- tionship of the Chinese government (cur- CogRteNrCtEng

cated market for the first time since 1989. The rently rated A3) with the financial sector, even MOOdy's3 S&pa

bank obtained a six-year, $175 million facility though there is no official guarantee of the Investrent grade

(raised from an original $150 million) at an external obligations of these institutions. Chile N/A BBB+/AA"

all-in price of 1 7/8 percentage points over Newly instituted reforms in the financial sec- China A3 BBB2

LIBOR. Elsewhere in the region, Slovenia toraimedatimprovingthecommercialviabil- Colombai Bal BBB-iCzech Republic Baa3 BBB2

received its second syndicated loan. The two- itv of banks are also reflected in the improved Greece Baa I BBB-2I ~~~~~~~~~~~~~~Indonesia N/A BBB-2

and-a-half-year, $10 million loan was increased ratings. Israel Nq/A BBB+'

to $15 million due to oversubscription and Elsewhere in Asia, Standard and Poor's Korea, Rep. of Al A+'Malaysia A2 A/

offered at a spread of 2.25 percentage points affirmed Indonesia's sovereign rating of M+"Portugal AlI AA-/

over LIBOR. BBB-, thanks in part to prudent fiscal and AA

In Latin America, Venezuela's Corpoven, monetary policies pursued by the govern- Thailand A2 A-

an affiliate of Petroleos de Venezuela, ob- ment, combined with support from foreign Below vestment groe

tainedal2-year, $300 million loan ata spread private investment. The rating agency also Argentina BI BB-'

of 150 bp over LIBOR. The syndicated loan assigned a BB rating to PT Indah Kiat Pulp & BHungary Bal BB+2

was provided byjapanese banks (and foreign Paper's $175 million bond issue. The rating India Ba2 BB+Mexico Ba2/ BB+/

banks inJapan), and the loan was guaranteed reflects the company's strong position in the Baa I M -2

by the Export-Import Bank ofJapan. Indonesian pulp and paper industry and its Philippines Ba3 BB-'Trinidad and

future growth prospects. PT Inti Indorayon Tobago Ba2 N/AUruguay Bal N/A

Utama's $110 million issue also received a BB Venezuela Bal BB3

MARKET CREDITWORTHINESS rating. * The first rating apples to foreigncurrency deut and the second to

More emerging-market companies are being In Latin America, Moody's assigned a first- domestic currency debt.a.January 13,1(994.

rated as established issuers diversify funding time rating of Bal to the Republic of bajanuary 24, 1994..'Stable outlook.

sources and access a wider investor base and Uruguay's two $100 million eurobond issues. 2. Positive outook.

as new borrowers (often less well known) en- The rating reflects Uruguay's improved fiscal 3. Negative outlook.Rating systems for investment-

ter the market. The fourth quarter saw about and monetary management under a structural grade bonds are as fo lowsn

25 new issues with ratings. As emerging-mar- reform program. In December, S&P up- Moody's S&P

ket issuers shift from the eurobond market to graded Chile's external debt obligations to a Aaa MA+

other international bond markets, demand BBB+. The rating reflects Chile's record of Aa2 M

for ratings is rising. For example, Latin issu- prudent economic management. Following Al A+P2 Aers entering the Samurai market have all oh- passage of NAFTA, S&P revised the foreign A3 A-ers Baal BBB+~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~alBB

tained ratings because of the requirement that currency debt rating of the United Mexican Baa2 BBB

all issuers be rated (a minimum of BBB-) in _ Source: Moody's and Standard &

this market. Although issuers in the Yankee CHART 4 Poor's.

market are not formally required to have a RATINGS OF BOND ISSUES FROM

rating, a credit rating provides investors with DEVELOPING COUNTRIES

a standardized benchmark for evaluating the * Medium investment grade

issue. E Low investment gradeB 3elow investment grade

U MOODY'S UPGRADES THREE CHINESE1993 4 / / 1993Q4 3%065%

FINANCIAL INSTITUTIONS AND ASSIGNS A

FIRST-TIME RATING TO URUGUAY G D7Moody's followed its upgrade of China's sov-ereign external obligations with improved Unroted 82% Unroted 85%

ratings for three Chinese financial institutions.Bank of China, CITIC, and People's Construc- Source: Euromoney Bondware and Wond Bank dasa.

FEBRUARY 1994 11

INTERNATIONAL LENDING AND CAPITAL MARKETS

States from stable to positive, and affirmed the assigned a BB rating to Argentina's 10-year,BB+ rating on its long-term US dollar debt. $1 billion global bond issue. S&P rated BB-S&PassignedaBBB-ratingto Colombia'sYl0 Argentina's Banco de Galicia y Buenos Airesbillion Samurai bond issue, placing it between and Banco Rio de la Plata as both entered theChile (BBB+) and Mexico (BB+). Thanks to Yankee market. The rating is constrained bygood economic management, uninterrupted the BB- rating assigned to Argentina's sover-servicing of foreign debt, and the govern- eign debt.ment's commitment to an ambitious reform In January, both Moody's and S&P down-program to further liberalize the economy, graded Turkey's long-term foreign debt to BalS&P rates Colombia's outlook as stable. Co- (below investment grade) and BBB-. The rat-lombia also received a second investment- ings reflect the country's large fiscal deficits,grade rating (BBB) from Duff and Phelps. which have contributed to high inflation and

Also in Latin America, Duff and Phelps a widening current account deficit.

EQUITY PORTFOLIO AND FOREIGN DIRECT INVESTMENT

EMERGING STOCK MARKETS fueled by large foreign inflows. India's deep-

ening reforms and a rebound in corporatePRTHE IFCEXSUDOLLAR-BASEDRCOMPOSIE earnings have attracted foreign investors.

PRICE IDXSRE37India's economic reforms are recent, and in-ASIA REGIONAL INDEX WAS UP 46 PERCENT, vestors are entering the market hoping toTHE LATIN INDEX By 26 PERCENT make big gains as the market rises to reflect

Improved prospects attracted foreign inves- fundamentals. International investors, whotors, especially US mutual fund managers, to have already invested in Latin America and inAsian stock markets. As global investors dynamic Asian economies, are also enteringreweighted equity portfolios in favor of Asian the Indian stock market to diversify their port-emerging stock markets, these markets saw folios. Another attraction of the Indian mar-huge price gains. A shift in weightings away ket is the relatively large market size (capital-

4th from these markets could likewise have a re- ized at $90 billion) and monthly tradingQuarter

71 X =1993 verse effect on these share prices and dry up volumes averaging $2.3 billion. Whether regu-liquidity in the local market. Several markets lation of the market and its transparency will

Percentage change in the region have seen rapid growth in price- be improved remains an investor concern,Since one Since last earnings ratios. The fourth quarter saw Thai however.year ago quarter share prices climb to record highs (up almost Elsewhere in Asia, Malaysian shares contin-

97. +71.5 72 percent) as investors aggressively entered ued to post big gains on good economic per-the market. Foreign investors, mostly from the formance and favorable prospects for corpo-United States, Europe, and Hong Kong, are rate earnings. The 41 percent rise in thebelieved to have invested $1.6 billion. Finan- Malaysian market has been fed primarily bycial and property stocks were popular, but US investors purchasing blue chip stocks andtelecommunications also performed well on domestic investors demanding second-tierTelecom Asia's privatization. Lower domestic stocks with upside potential. At 43.5 (Decem-interest rates are attracting local mutual fund ber 1993), price-earnings ratios are double themoney, helping to deepen the market. Local levels of a year ago and much higher than themutual funds hold less than 5 percent of ratios in most major developed markets.Thailand's stock market capitalization. The Indonesian market was up by 33 per-

Despite the December broker strike on the cent as foreign interest in the market stimu-Bombay Stock Exchange, the Indian stock lated domestic demand for shares. Philippinemarket rose 26 percent in the fourth quarter, share prices posted a 70 percent gain on for-

12 FINANCIAL FLOWS AND THE DEVELOPING COUNTRIES

EQUiTY PORTFO_IO .ANr FOREEGN DIRECT INVESTMENT

eign participation in the market. The Korean centration, costs of transactions, settlement

market, however, showed only modest gains systems, availability of derivatives allowing for

on encouraging economic news. In Novem- hedgeability, degree of openness, repatriation

ber, US and other foreign investors purchased controls, withholding and capital gains tax)

(net) $841.7 million of shares, the highest Euromoney ranked Korea highest (among

monthly level since foreigners were allowed low- and middle-income countries), followed

to participate. Injanuary, Korean authorities closely by Malaysia. Other emerging equity

proposed measures aimed at slowing specu- markets that were rated highly by institutional

lative activity in the stock market. investors were Brazil, Thailand, Poland, Ar- 4th

Low interest rates and good economic per- gentina, and Mexico. Quarter1993

formance propelled Latin American stock Some exchanges have moved to improve

markets, all of which ended the quarter with market transparency and discourage insider

moderate to large gains. Prices soared to new trading. For example, Argentina is consider- Percentage changeSince one Since last

highs in the Mexican stock market, up 42 ing a Law on Transparency of the Markets, year ago quarter

percent, helped by increased confidence in which would raise the ceiling on fines for in- + 17.0 +25.7

the market because of approval of NAFTA in sider trading. Likewise, the SEC in Chile is

the US Congress in November. Lower yields supporting a bill that would make insider trad-

on Mexican Cetes, popular with foreign inves- ing a criminal offense. India recently intro-

tors, also shifted some demand into shares and duced new regulations providing greater pro-

reflected improved inflation expectations. tection for investors by prohibiting brokers I I

Elsewhere, Poland's Warsaw Stock Ex- from speculating with clients' funds, and it

change was the best-performing market in also instituted strict capital adequacy require-

1993, with a gain of 1,095 percent (in local ments for brokers. Brazil's SEC is attempting

currency). Most of the rise, however, is due to to improve monitoring of exchanges.

a small and stagnant supply of shares and

speculative buying by domestic investors.Zimabe' stckmaketroe 2 prcnt CHART 5 D 4th

Zimbabwe's stock market rose 42 percent EMERGING STOCK MARKETS Since one Since lost Quarter

thanks to the government's far-reaching lib- Percentage change year ago quarter 1993

eralization measures (effective at the begin-ning of 1994). Foreign investors, who have

been allowed only sincejuly to participate on +67.3 . +109.1

the stock exchange, purchased $12 million of

shares last year. +3 .4 +33.1+3.2

* GOOD REPORTING REQUIREMENTS,

RELIABLE SETTLEMENT SYSTEMS, AND 13.1I

TRANSPARENCY ARE RANKED HIGHLY BY +995

INSTITUTIONAL INVESTORS +4 I7

Along with liquidity and market size, investors +40.8

value quality of accounting and legal infra- -structure, reliability of settlement, transpar-

ency, and availability of brokers. A poll by - _

Euromoney of 20 institutional investors placed +132.2 +213.7

Mexico highest among emerging markets +69.8

based on investors' perception of quality of +12.4

research, accounting and legal structure, and ll + 155 -1o0s

reliability of settlement. Using objective crite-

ria (such as market size, liquidity, market con- Souce rneateona F-a-ze Co-po-ton dt.

FEBRUARY 1994 13

EECU r-r POr-F4TFOLn .N - T DIREC-T iNVESTMENT

NEW EQU ITI ES, QUASI- evenly among Europe, the United States, andEQUITI ES, AND DERIVATIVES Asia. Elsewhere in Asia, the largest Indian pro-

ducer of armyjeeps, Mahindra and Mahindra,U DEVELOPING-COUNTRY INTERNATIONAL raised more than $75 million with the first In-EQUITY ISSUES SURGE AS LOCAL FIRMS TRY dian global depository receipt (GDR) not of-TO RAISE FUNDS CHEAPLY fered at a discount. The deal was originally $65

International equity issues by developing million with a 15 percent greenshoe option,countries almost doubled to $2.8 billion in the which was later exercised due to oversubscrip-fourth quarter in response to developing- tion. The GDSs were placed with institutionalcountry firms' desire to raise funds cheaply investors in Europe (40 to 45 percent), theand high demand by foreign mutual fund United States (25 percent),andAsia and othermanagers and other investors. parts of the world.

Televisa, one of Mexico's most successful Bolivia entered the international equitycompanies, raised almost $1 billion in GDSs, marketwith a $48 million public listing by theof which two-thirds were sold to US investors Bolivian power company, Compania Bolivianaand the rest split about evenly between Mexi- de Energia Electrica. International investorscan and other international investors. The were eligible for 400,000 shares out of a totalnew shares represent about 10 percent of the of 2 million. A $26 million equity offering bycompany'sequity.Anothersuccessfuloffering Fabril marked Peru's debut in the interna-out of Mexico was by Grupo Mexicano de tional equity markets. Demand for the second-Desarrollo (GMD).The $282 million issue was ary offering, which did not involve the issueseveral times oversubscribed, but a greenshoe of new shares, was mostly from institutions inoption (which permits additional offering on the United States, Canada, Australia, andstrongdemand) of 1.25 million shareswas not Europe. The first GDR offering by a Sriexercised. Lankan borrower will raise about $30 million.

Thailand's largest-ever flotation, in connec- China's Maanshan Iron and Steel launchedtion with the privatization of Telecom Asia, the largest issue of Chinese H-shares in theraised $484 million. Telecom Asia's global fourth quarter. The offering of $516 milliontranche of 111.5 million shares (half of the was well oversubscribed ($8.9 billion); sometotal IPO of 223 million shares) was reportedly 75 percent were placed with internationaloversubscribed 25 times, with demand split institutional investors, with 25 percent or so

taken up by US investors under Rule 144a. The

CHART 6 rest went to Europe and Asia. In December,INTERNATIONAL EQUITY ISSUES BY the first depository receipts program for B-DEVELOPING COUNTRIES shares of a Chinese company, ShanghaiUS$ billions

9.6 * Other Erfangji, was established.

Latin America U THE FIRST CLOSED-END FUND FOR RUSSIAU Asia

The first closed-end fund for Russian equity5.9 investments was launched in December. The

10-year fund plans to raise an initial $50 mil-lion through a private placement to investors

2.8 in the United States and Europe. The fund,in which the EBRD will invest $16.6 millionand the IFC $8 million, is aimed at sectors thathave the potential to earn hard currency by

1992 /993 1993Q4 exporting goods and services or providingi-ce: Euooney Bondare products and services in Russia that can be

14 FINANCIAL FLOWS AND THE DEVELOPING COUNTRIES

EQUITY PORTFOLIO AND FOREIGN DIRECT INVESTMENT

invoiced in hard currency. The fund may also Asian issuers in euroconvertibles. Relatively TABLE 5

invest in newly privatized industries. It is esti- short maturities and high interest rates in DEVELOPINGCOUNTRIES' BEST-

mated that the fund's share in joint projects domestic markets have encouraged domestic PERFORMING

would be about 20 percent, ranging from companies to look overseas for financing. CLOSED-END FUNDS

$500,000 to $4 million for individual projects. With five deals totaling $500 million in the PerrageAverage

Emerging-market country funds and re- fourth quarter, Thai equity-linked eurobonds Market return

gional closed-end funds outperformed indus- dominated the market. Philippines (4) 40.62Thai arid (I 4) 28.07

trial-country funds in 1993. Emerging-market Benefiting from a strong stock market per- Malasia/Singapore (7) 20.80

funds posted strong results in December, with formance and improved investor contidence, Asia (16) 19.75Pakistan (2) 1 6.38

Asian funds the top performers. Indian issuers raised more than $480 million Chaki (14) 15.51

Several Asian investment funds were in equity-linked debt securities in the fourth Mexco (3) 15.04

launched in the fourth quarter-the Korea quarter, closing 1993 with a $100 million ChiEe (4) 13(4

Fund ($100 million) and the Korea Equity euroconvertible for Sterlite, a copper com- Indonesia(13) 12.65

Fund ($100 million), the Asia Tigers Fund pany. Each $5,000 bond is convertible into India(5) 11.21

($270 million), and the Asian Dragon Portfo- common stock, but investors can avoid local Korea, Rep. of( IS) 9.04Emerging Europe (4) 7.27

lio Fund ($35 million). The firstcountryfund capital gains tax by converting bonds into Portugal (5) 3.78

for Sri Lanka attracted mainly European and GDRs instead. India's Reliance Industries is- Turkey (2) 2.43

Asian institutional investors. The $25 million sued the country's largest euroconvertible. Brazil (4 1/' () 2.14

fund is expected to invest about half its capi- Ten times oversubscribed, the issue was $140 Austria/Hungary (2) 0.06

tal in blue chips and the other half in lesser- million, including a greenshoe option of $15 Note: As of DecemDer 3a1, 1993.Figures n parentheses are number

known second- and third-line stocks, as well million that was exercised. Also in the fourth of funds in category.Seurce: Lipper Internationa Closee-

as participate in Sri Lanka's privatization pro- quarter, Gujurat Ambuja Cement offered the End Funds Service.

gram. The first country fund for Pakistan to first convertible without a put option.be listed on the NYSE (two others were un- Euroconvertibles are becoming popularlisted) was set tip. The $60 million closed-end with Philippine issuers, too. JG Summitfund will make long-term investments in small Holding's 10-year, $260 million deal (with acompanies thought to be undervalued. $40 million greenshoe option) is convertible

into class B common shares. China's Guang-

dong Investment launched a five-vear, $102INVESTORS RESPOND TO STRONG SHARE -million euroconvertible in October. Euro-PERFORMANCE pean institutional investors purchased 56 per- TABLE 6

COUNTRY FUNDS:Lowinternationalinterestratesandstockvalu- cent of the issue, and US investors about 30 ToP FIVE DISCOUNTS

ationsatrecordhighsinsomeAsian countries percent. China Textile Machinery Stock is- AND PREMIUMSPercentoge c(flerence between net

have boosted euroconvertible issues. Demand sued a five-year, SFr 35 million issue (convert- osset vaoue ond share pnoe

has been sparked by the strong performance ible into B-shares) with a put option at three Percentageible ~~~~~~~~~~~~~~~~~~~~~~~dfferenceof Asian markets; investors have been attracted years and one month. Lrgest premiums

to convertibles because of the yields on the India Growvth Fund Inc. 51.27

bonds and the reduction of downside risk * INDO-CHINA WARRANTS PROVIDE Indunes Fundic 47.90providead bye options o dwnidrs INVESTORS WITH EXPOSURE TO VIET NAM KraIvsmn udIc 48provided by options on the issues. Moreover, China Fund nc. 39.99

convertibles are less volatile than the under- Potential earnings based on strong equity Jakarta Growth Fund Inc. 34.94

lying stock market and more liquid because performance, growth prospects, and liquidity Largest discountsThailand Internationalthey are denominated in dollars. Demand considerations fueled Southeast Asian equity- Fund Ltd. -37.36

from investors in Europe has been strong, with warrant activity. A new equity-warrant offers arst-Phiupp ne nvestment

more than half the Asian euroconvertibles investors an opportunity to circumvent direct Trust PLC -31.76

reportedly placed there; the United States investmentrestrictionsimposedbyVietNam, TurkeyTrustPLC -30.93Tha Development Capital

took up about a third. which is reorienting itself to the international Fund Ltd -30 79

On the back of a strong stock market per- economy through market-based reforms. The Note As of December 3 , 1993Source: L pper Internat onal C osed-

formance, Thailand continues to lead other 50 million call warrants are exercisable into a End Funds Senrvac.

FEBRUARY 1994 15

EQLsJTY POP!TEFOL )O AND F-O'RE CN DIRECT INVESTMENT

basket of stocks of seven companies listed on direct loans, and 10 percent debt of C6teAsian markets and having trade- or invest- d'Ivoire, where the market anticipates a refi-ment-related exposure to Viet Nam. nancing agreement.

Warrants on a basket of high-quality The first public issue of pure Russian war-

Southeast Asian telecommunications stocks rants was made on US dollar Vneshekonom-were also offered in the fourth quarter. The bank loans. The $100 million European-style

underlying basket is composed of telecom warrants have a down-and-out feature, whichshares from Hong Kong, Malaysia, and the means that the warrants would become null

Philippines. The first-ever H-share warrants and void if the daily price hits the down limit

on a basket of six Chinese stocks were also (37.5 cents on the dollar) at least once beforeissued. The issue, which was targeted or on the exercise date. Buyers of the warrants

mainly at European investors, will enable were mostlv institutional investors, with some

the holder to buy H-shares in six Chinese demand from Latin America.enterprises.

entepriss.* YPF'S CROSS-CURRENCY SWAP YIELDSAnticipating the ratification of NAFTA, the

first two-year warrants were issued on a Latin SAVINGS

American stock market. The one million In the largest derivative deal for a Latin Ameri-American-style warrants on the Mexican Bolsa can borrower, Argentina's YPF swapped a

Index help investors to deal with stock price Y35.3 billion fixed-rate loan from Japan'svolatility. Elsewhere, one million call warrants Export-Import Bank into fixed-rate dollars.

were issued on a basket of Latin American Since YPF's revenue is denominated in dollars,stocks. The basket comprises stock indexes the swap allows YPF to hedge against fluctua-

from Mexico (40 percent) andArgentina (20 tions in the yen'svalue. YPF will pay the bankpercent) and three stocks each from Brazil (20 that undertook the swap a fixed-rate dollarpercent) and Chile (20 percent). interest and principal schedule, and the bank

will pay YPF the interest and principal it owesU WARRANTS ON RUSSIAN AND OTHER DEBT in yen. Through the swap, YPFsaved about$15TARGETED AT RETAIL INVESTORS million to $20 million over a conventional

Two warrants were offered on loans that the bond issue to prepay the yen obligation.

market expects will be restructured, targetingthe retail market. Required minimum pur-chases were kept low to allow smaller investors FD I AND PR I VATI ZAT IONto participate. A $100 million European-style

l A SURVEY BY JAPAN'S EXPORT-IMPORTwarrant was offered on a basket of debt con-sisting of Brazilian MYDFAs (40 ercent) BANK SHOWS AN INCREASE IN THE NUMBER

p ~~OF DOMESTIC COMPANIES WITH PLANS TORussian syndicated loans (22.5 percent), Bul- OF OMEST AN

garian syndicated loans (12.5 percent), INVEST OVERSEAS

Ecuadoran NMYRA-to-be (12.5 percent), and In response to sliding sales and profits and aPeruvian non-Citibank loans (12.5 percent). strong yen (which has pushed up domesticThe warrants allow retail investors access to costs of production), more Japanese compa-

assets usually reserved for larger qualified in- nies are looking to invest overseas. For the first

vestors. A second $100 million of debt war- time infiveyears,Japan EXIM'ssurveyof (overrants were issued on another basket. The bas- 330) companies found an increase in theket comprises 18 percent each of Bulgarian number of companies planning to increase

Foreign Trade Bank syndicated or direct FDI. Most companies (92 percent) planned

loans, Ecuadoran MYRA, Peruvian non- to invest in China in the near term, with 150Citibank syndicated loans, Polish 1988 DDRA, companies putting China among their top fiveand Russian Vneshekonombank syndicated or investment destinations. The companies also

16 FINANCIAL FLOWS AND THE DEVELOPING COUNTRIES

EQU<TY FORTFOL;0 AND FODR'EIGN DIRECT INVESTMENT

indicated a strong desire to invest in otherAsian countries, including Viet Nam.

ON PRIVATIZATION

K NAFTA BOOSTS THE ATTRACTIVENESS OF Hungary's privatization of Matav, the state-

MEXICO TO INVESTORS owned telephone company, is the first for

The pattern and magnitude of FDI in Latin Eastern Europe in telecommunications and

America and the Caribbean have been influ- the region's largest privatization to date. Theenced (and will continue to be shaped) by winning bid ($875 million for 30 percent ofNAFTA, which came into force in 1994. The Matav's shares) was made by a German con-

elimination of restrictions on FDI called for sortium, which will also allocate about $400

by the agreement, especially in manufactur- million toward a general capital increase.ing, opens up new industries and opportuni- The largest privatization through a voucher

ties to foreign investors. The growth of the auction was launched in Russia. About 18

Mexican economy, coupled with the prospect percent of the equity (more than 3.6 million

of accessing the enlarged North American shares) of the biggest oil and gas producer,

market, could stimulate third-country invest- Surgutneftegaz, is being swapped for privati-ments despite the possible dampening effect zation vouchers issued to the public last year.of origin/local-content requirements. The Foreigners, however, will not be eligible to

reduction in tariffs and elimination of exchange vouchers for shares.nontariff barriers would encourage location Turkey's privatization program received aof labor-intensive production of intermediate boost with the recent international sale of the

goodsorassemblyoffinalgoodsinMexicofor government's (15.3 percent) stake in Netas-either domestic consumption or export. Northern Electric Telekomunikasyon (Netas),

Mexico itself could become an export plat- 51 percent owned by Northern Telecom ofform for North American transnationals to Canada. The sharcs, worth $60 million, wereserve other local markets in Latin America. sold mainly to investors in the UK, the UnitedNAFrA could also influence FDI by Mexican States, and France. The sell-off was poorlytransnationals. Increased competition could received in furkey, Forcing the governmentinduce them to internationalize and invest to offer a large amount of shares to foreign

directly in the North American market, or institutions. The Industrial Finance Corpora-establish alliances with North American tion of India floated 45 percent of its sharestransnationals. through a local public offering.

SECONDARY MAiRKET-S FOR DEVELOPING-COUNTRY DEBT

iZ INVESTORS SEEKING HIGH RETURNS FUEL Investors' favorable perception of Argen-SECONDARY MARKET PRICE OF DEVELOPING- tina helped its par bonds gain more than 8COUNTRY DEBT

percent in the quarter. Investors responded

A widening base of investors seeking high positively to the country's strong domesticreturns bolstered the secondary market for performance and to constitutional reforms

developing-country debt. So, too, did favor- allowing President Menem to run for anotherable developments, such as the passage of term. Another plus was Argentina's success-NAFTA in the US Congress. Both the Morgan ful $1 billion global bond offering, reflecting

and Salomon Brothers Brady bond indexes its increasing acceptance by foreign investors.showed big returns (13.9 percent and 13.8 Despite political difficulties and patchy

percent, respectively). Mexican pars rose al- economic news, Brazil's IDUs also endedmost eight points to close the quarter at over higher, on investors' expectations that law-

80 cents to the dollar. makers would pass a tough budget. Domestic

FEBRUARY 1 994 17

SE C ,(:FARX ' ARKE TS FOR DEVELOPING-COUNTRY DEBT

political events and uncertainty surrounding Brady's and exotics also shot up, as investorsthe economic policies of the new administra- sought similar potential gains, apparently at-tion added volatility to Venezuelani debt taching little weight to country fundameintals

prices. and domestic risk.

Bulgaria's debt reduction agreement in Among the potential debt restructuringNovember surprised the market, rallying pros- countries, Peru saw a 26-point rise in price inpects of Brady-style debt reduction for some the fourth quartcr. And despite slow progress

other countries. Bulgaria's debt pricesjumped on debt negotiations, Peru's debt prices ended10 points to 39 cents on the dollar on an- the quarter at about the same level as Argen-

nouncement of the deal. Prices of other pre- tine pars. Ecuador, which is also negotiatinga deal with commercial bank creditors, saw a

CHART 7 17-point increase to close at 51. AlthoughSECONDARY MARKET PRICES, 1989-93 Panama had notyetbegun talks with the hankPercentage of face value90 creditors, the price of bank debt jumped on

investors' expectations of such negotiations.80 Poland's debt was up 15 points, despite slow

progress on debt negotiations. The market70 .. apparently expects Russian commercial bank

debt, which has been rescheduled in succes-60 sive quarters, to be further restructured.

Brady countries Vneshekonombank debt, which had gainedS -- ---- --- --- -- -- -- ---- --- ---j- ---1 --- ------------- -------- -- -- -------- -------

more than 10 points (because of Bulgaria's

40 deal), saw a sharp erosion of these gains fol-lowing the parliamentary elections. Even so,

30 / ff . 0 the debt ended the quarter 15 points higher

>/ %~ SIMICSa at 50.20 - i - - Debt investors searching for high yields and

large price gains are venturing into new anda Severely indebted middle-income countriesSor,rce:TableA.8. often inactive markets, including some Afri-

can countries-for example, C6te d'Ivoire,

CHART 8 which witnessed a nearly 40 percent gain inSECONDARY MARKET PERFORMANCE OF LATIN EUROBONDS, the price of its commercial bank debt. Else-1993 where, the market in Cuban debt is beginningReturn index: December 31, 1992 = I00 t

to see trades.0~~~~~~~~~~~~~~~~~~~~-- -- ---- --- ..... ---- -------

. LATIN EUROBOND DEBT MARKET POSTS

MODEST GAINS!15. . . - ------ ---- - -----L _- --- --- - --

Latin Eurobond Index With greater issuing activity, larger issues,Government Bond Index and a widening investor base, the secondary

. . 2_ Govern~~~~ment Bond Index 1/0. market for developing-country eurobond

debt is growing, although it is much smaller105 > / and less liquid than the Brady bond market.

---- - ----iifjj;.ar- ---- --------- ----- The Morgan Latin Eurobond Index, which

g ,, *" \, + S&P SOO tracks the performance of the liquid section

of this market, yielded a 4.1 percent return

, M Iv zi gmr iWm SB in the fourth quarter, outperforming bothNote: J.P Morgans Latin Eurnbond Index ad US Government Bond Index. the US government bond and the US stockSource: J. P Morgan. markets.

18 FINANCIAL FLOWS AND THE DEVELOPING COUNTRIES

,r- F!,- -1<- LVV: a ULT;L.LTR At AN > ID B ILATERAL

MULTILATERAL FLOWS ity of 6,380 jobs. In the previous fiscal year, TABLE 7

MIGA had issued 27 contracts providing $374 SUM MARY MEASURE* THE IMF SEEKS AN ENLARGED ENHANCED ml o c . OF TERMS OF COVER

million of cover, with isurance coverage BY MAJOR EXPORTSTRUCTURAL ADJUSTMENT FACILITY the first half of fiscal 1993 amounting to $110 CREDIT AGENCIES

Score ScoreAn enlarged Enhanced Structural Adjustment million under nine contracts. MLTa ST5

Facility (the IMF's concessional lending facil- Chile 82 85China 87 9 1

ity) is expected to be operational by end- Czech Republic 71 63

February 1994. The enlarged ESAF (with a BILATERAL ODA AND EXPORT Romania 83 89

proposed capital of $7 billion and a subsidy CREDITS Tunisia 75 84Algerna 68 84

account of $2.9 billion) is expected to have the Colemia 68 84

same function as its predecessor, providing a JAPAN'S EXIM GUARANTEES A $300 Ghana 61 45MILLION SYNDICATED LOAN TO VENEZUELA India 69 83

loans to low-income countries undertaking Indonesia 63 75

economic reform. Loan terms under the ESAF The Export-Import Bank of Japan approved Morocco 60 83

are highly concessionary, with a 1/2 percent about $650 million in new untied loans and Philipaines 60 30

interest rate and 10 years maturity with five- guarantees to developing countries in the Argentina 57 75

and-a-half years grace. fourth quarter. Under its expanded guarantee Iran 45 63

facility, the EXIM Bank guaranteed a $300 mil- Mexico 55 84U THE WORLD BANK PROVIDES LARGEST Pakistan 56 76

lion syndicated loan to Venezuela's Corpoven. Russ an Federation 41 65PROJECT LOAN TO RUSSIA This is the second such guarantee under the South Africa 57 52

Turkey 4 1 65The World Bank has approved for disburse- facility, which is aimed at promoting private Venezuela 54 69

ment a $610 million loan to Russia for reha- flows to foreign countries, but the first for a Zmbabwe 58 70

bilitating its oil sector. This largest project loan foreign-currency-denominated loan. In Octo- Brazl1 35 58Ecuador 32 76

by the Bank is part of a $1 billion project be- ber, the EXIM Bank disbursed a short-term Egypt 31 91

ing jointly funded by the Netherlands, the bridge loan of $22.5 million to Viet Nam, as FormerYugoslavia 29 27

EBRD, and three producer associations in part of the $85 million corinancing arranged Bulgaria 17 21C6te d'lvoire 18 77

Western Siberia. by the French and Japanese governments to Iraq 0 0

help Viet Nam clear arrears with the IMF. Kenya 17 47U THE WORLD BANK'S MULTILATERAL Nigeria I8S54The US Eximbank signed a Project Incen- Peru 0 65INVESTMENT GUARANTEE AGENCY DOUBLES ...

tive Agreement with Russia to finance new Note As of end-SeDtember 1993.INVESTMENT INSURANCE COVERAGE projects in all sectors of the Russian economy. a. Medium- to long-term.

projects inall sectorsof the Russan economy. b. Short-termn.

In the first half of fiscal 1994 (July-December This coincides with the previously signed $2 Union data n e

1993), MIGA issued 18 investment insurance billion Oil and Gas Framework, which will

contracts covering $239.9 million. Among assist in the rehabilitation of existing oil and

countries receiving first-time guarantees were gas production facilities. Under the new agree-

Brazil, Peru, and Uzbekistan. (Another four ment, US Ex-Im will provide financing for the

contracts, covering $117 million, were also purchase of goods and services for new

committed.) The total direct investment cov- projects, and repayments will be obtained

ered by the 18 projects is estimated at $992 from these projects without the explicit guar-

million, with employment-generating capac- antee of the Russian government.

DEBT RELIEF UPDATE

OFFICIAL CREDITORS service arrears (plus amounts falling due im-

* PARIS CLUB CREDITORS GIVE VIET NAM minently) as of end-December 1993. Underenhanced Toronto terms, official develop-

RESCHANCEDUTOLR KENYAOS DEBT MS,ANDment assistance loans will be repaid over a veryRESCH E DULE KENYA'S DEBT long period, and non-ODA debt according to

In the fourth quarter of 1993, Vict Nam re- a menu. The agreement also provides for the

ceived enhanced Toronto terms on its debt swappingofeligible debt (up to lOpercentof

FEBRUARY 1994 19

D E R SE: - F` DAT

non-ODA debt outstanding as of December turing $9.3 billion of commercial bank debt.

31, 1993, or US$20 million, whichever is Among the possible options to be included in

higher) for nature, aid, equity, or other local the rescheduling are a debt buyback, a

currency debt. Unlike enhanced Toronto collateralized discount bond, and a front-terms received by other countries, the agree- loaded interest reduction bond.ment with Viet Nam does not contain a good- Jordan successfully completed a Brady-style

will clause under which creditors would have debt agreement with commercial banks in

agreed to meet to discuss future debt stock December. The agreement restructures an

reduction. estimated $895 million of debt-$746 million

In January, the Paris Club rescheduled of principal and $149 million of interest ar-

Kenya's arrears as of end-December 1993 on rears. Commercial bank creditors have three

debt contracted before December 31, 1991. options:The agreement contains one repayment * Thirty-year par bonds with principalschedule that applies to all debt. The repay- collateralized by 30-year US Treasury zero-ment period is 1995-2001, with semiannual coupon bonds, which carry a six-month roll-

payments initially of 2.5 percent each of the ing interest guarantee at 6 percent. Intercsttotal amount rescheduled, increasing to semi- on these bonds will be paid semiannually at 4annual payments of 12.5 percent in 2001. The percent foryears 1 through 4,5 percent in year

agreement also provides for debt swaps (up 5, 5.5 percent in year 6, and 6 percent there-to 10 percent or US$10 million, whichever is after.higher), as under the framework of enhanced * Thirty-year discount bonds with princi-Toronto terms. pal collateralized by 30-year US Treasury zero-

Also in January, the Paris Club creditors coupon bonds and interest guaranteed at 7agreed to extend for four months (until April percent ayear. Eligible debtwill be exchanged1994) the consolidation period of the April at a 35 percent discount on its face value, and1993 debt rescheduling with Russia. The April the bonds will carry an interest rate of 13/161993 rescheduling covered maturities until percentage point over six-month LIBOR.

December 1993. * Buyback at 39 cents to the dollar of the

In November, the French government can- face value of eligible principal and unpaidceled more than Ffr 800 million of debt of interest up to a maximum of $75 million.Cameroon, Congo, C6te d'Ivoire, and Gabon. Jordan also agreed to make a cash paymentFollowing thejanuary devaluation of the CFA equivalent to 50 percent of outstanding inter-franc, France has proposedwriting off another est on claims eligible for conversion into dis-Ffr 25 billion owed by 13 African countries count bonds and 10 percent of accrued inter-affected by the exchange rate adjustment. est on claims to be exchanged for par bonds.France is willing to establish a Special Devel- The remaining interest arrears will be con-opment Fund of Ffr 300 million, with possible verted to interest arrears bonds (PDI bonds),participation from other creditors and do- which will have a 12-year maturity and inter-

nors, for social adjustment in the CFA zone. est of 13/16 percentage point over six-monthLIBOR. All bonds (par, discount, and PDIbonds) will be eligible for debt conversion at

COMMERCIAL CREDITORS some future date.

Elsewhere, the Dominican Republic isE BULGARIA REACHED AN AGREEMENT IN making progress toward a final agreement inPRINCIPLE ON RESTRUCTURING principle with creditors on restructuring itsCOMMERCIAL BANK DEBT commercial bank debt.

In November, Bulgaria reached an agreement Brazil has received 96 percent of the com-

in principle with its creditor banks on restruc- mitments needed for a Brady restructuring

20 FINANCIAL FLOWS AND THE DEVELOPING COUNTRIES

DEBT RELIEF UPDATE

deal, and has made a second payment of$160 be approved. Brazil has a deadline ofApril 15,million on interest arrears outstanding for 1994, to conclude the deal. Russia's commer-

January-July 1992. An IMF standby agreement cial debt restructuring has stalled due to legal

to purchase the zero-coupon bonds has yet to issues about Russia's sovereign immunity.

COMMERCIAL BANK PROVISIONING AND CAPITAL ADEQUACY

* AMERICAN BANK PERFORMANCE STRONG; ten off. At Y13.7 trillion ($125 billion), TABLE8

PORTFOLIO PROBLEMS PROMPT JAPA.NESE nonperforming loans at the 21 big banks were RISK-WEIGHTED

BANKS TO WRITE OFF BAD LOANS CAPITAL RATIOSup 7 percent (over end-March). At the 11 Percent

A continuing improvement in asset quality major commercial banks, falling property Tier I Tot

helped US banks to post higher third-quarter prices pushed up nonperforming loans to Y9.2 Britoin (U)Barcays 5.6 9.7

earnings. The return on assets of the nine trillion (a9.6percentincrease),and the share Lloyds 60 10.2

money center banks was 1.19 percent, up of nonperformingloansin totalloanswas 1.90 NatWest 5.5 10.2

nearly 18 percent on the second quarter and to 5.39 percent. Despite record low interest France (Ffr)BNP 5.0 8.7

138 percent on a year ago. The return on rates, narrowing bank lending spreads de- Paribas 7.6 9.0

equity climbed to 18.9 percent, more than pressed core profits at these banks by 10.6 Credit Lyonnais 5.0 8.2

double the 8.8 percent of a year ago. At 3.07 percent. Breaking with common practice, the Socete Generale 5.0 9.1

percent, the net interest margin was up on the major commercial banks wrote off Y997 bil- Germany (DM)Deutsche 5.4 10.5

second quarter (3.02 percent), but reflected lion of nonperforming loans. Although banks Dresdner 5.9 9.1

a narrowing trend. The share of nonperform- sold equity shares to cover loan losses, a down- Japon (Y)

ing assets continued to decline and, at 2.67 turn in stock prices translates into losses on Dai-Ichi Kangyo 5.0 9.8ing assets ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Bank of Tokyo 5.4 10.4

percent, was 1.41 percentage points below the banks' equity holdings. Efforts to cut operat- Sakura 4.5 9.1

levels a year ago. With a ratio of reserves to ing costs have not been successful. Sumitomo 5.6 8.9

nonperforming assets of 53.5 percent, banks Despite aweak domestic economy, German United Sttes (US$)Bankers Trust NY 8.2 1 4.51

are sufficiently provisioned against bad US banks have strong balance sheets, although C-¢corp 6.0 0.

loans. they continue to increase already high levels J.P. Morgan 9.3 13.3

US banks' fourth-quarter earnings are be- of provisioning against domestic loans. Their Nte: The numbes for French andGerman banks are as of December

lieved to have benefited from a strengthening operating results, however, continue to be 9fSepteor 1Jaee993 and Uor UK

economy. Banks are likely to report higher boosted by income from securities market bs as ofnBe 30 1993.Suc:SlmnBrothers andrevenues, as well as further improvement in trading. Elsewhere in Europe, UK banks are IBCA, December 1993.

asset quality. beginning to see a decline in nonperformingInterim results indicate continuing difficul- loans. UK banks have also cut operating ex-

ties at Japanese banks. In the six months to penses by reducing staff and branch networks.end-September 1993, rising problem loans Banks are expected to be favorably affectedlowered bank profits and bad loans were writ- as the economy strengthens.

FINANCIAL BRIEF: FINANCING FOREIGN DIRECT INVESTMENT

* RECENT TRENDS IN FINANCING FOREIGN mostly by equity investments, less so by prof-DIRECT INVESTMENT SHOW A SHIFT TOWARD its of foreign affiliates reinvested in recipientEQUITY FINANCING AND AWAY FROM countries. Although some investments are inREINVESTED EARNINGS

mergers and acquisitions, most are "green-Foreign direct investment in developing coun- field" investments, which add to the domestictries grew rapidly in the late 1980s and early capital stock of host countries.1990s. In 1992, it had reached an all-time high Typically, FDI flows recorded in the balanceof $47 billion (and in 1993 an estimated $56 of payments comprise equity investments,

billion). This surge in flows has been financed reinvested profits, and short- and long-term

FEBRUARY 1994 21

FINANCIAL BRIEF: FINANCING FOREIGN DIRECT INVESTMENT

CHART 9 In the first half of the 1980s, reinvestedREINVESTED EARN I NGS AND TOTAL IN F LOWS IN earnings of foreign affiliates based in those 30DEVELOPING COUNTRIES, 1980-92 developing countries accounted for 40 per-US$ billions

cent of all FDI inflows. In the second half of

the 1980s and in the early 1990s, that fell to

23 percent. For some countries, that decline12 was even steeper-down to 20 percent of to-

Total .infTow al tal annual inflows in Mexico, for example, in

8 - 1986-92. The amount of foreign affiliates'earnings that can be reinvested depends onthe existing stock of FDI, the profitability of

4 investments, and the value and share of prof-

its that are remitted back to the home coun-

.. Reinvested earmings try. Remittances may be limited legally (by, for

- example, foreign exchange restrictions) and

can be influenced by changes in taxation (es-Source: IMF and vUorid Bank data

pecially withholding taxes), inflation rates,

and exchange rates.

loans between parent companies and their Intercompany loans accounted for 9 per-foreign affiliates, all reported on a net basis. cent of all FDI flows into 38 developing coun-

Not all developing countries, however, report tries in the second half of the 1980s, downall three in their balance of payments. Thirty from 19 percent in 1980-85. In Brazil, for

countries do so consistently and accounted for example, short- and long-term intercompanya third of FDI flows into developing countries loans declined from 22 percent in 1980-85 toin 1992. The increase in FDI flows into these 16 percent in 1986-92. Intercompany debt is30 countries in the late 1980s and early 1990s preferred by some transnational corporations

was primarily in equity investments. The value as a means of financing investment abroadof reinvested earnings remained fairly con- because it is treated as equity by the host coun-stant in the 1980s, while the value of total in- try. Moreover, affiliates have greater flexibil-flows rose significantly-that is, the share of ity to repatriate loans and interest repayments

reinvested earnings in total FDI inflows de- on intercompany debt than dividends andclined. In some cases, the proportion of eq- profits. On top of that, withholding taxes onuity investment in FDI was quite substantial- dividends and profits can sometimes be

95 percent for Portugal and 86 percent for avoided through the use of intercompanyMexico in 1986-92. For Mexico, the value of loans, which are treated differently from ex-equity investments more than quadrupled ternal debt when a transnational consolidatesbetween 1980-85 and 1986-92. its accounts-that is, interest paid on debt is

deductible from the affiliates' taxable income.TABLE 9 For the United States, a major source coun-FINANCING SOURCES FOR FDI IN mMEXICO, 1980-92 try for FDI, reinvested earnings of foreign af-US$ millions filiates based in Latin America accounted for

1980-85 1986-92 69 percent of cumulative oufflows into that re-

Equity 673 2,836 gion in 1989-92. Earnings generated locally(51) (86)

Reinvested eamings 602 651 and ploughed back into the host country have(45) (20) been the principal source of financing for FDI

Short- and long-term loans 57 -179(4) - in the region and reflect the sizable stock of

-Value is negabve. US FDI already in place. In 1992, reinvestedNote: Figures in parentheses ame percentage share in totae.Source: IMF and World Bank data. earnings in Latin America, valued at about $5

22 FINANCIAL FLOWS AND THE DEVELOPING COUNTRIES

FINANCIAL BRIEF: FINANCING FOREIGN DIRECT INVESTMENT

TABLE 10 oping countries. Listing foreign affiliates onSOURCES OF FINANCE FOR US host country stock markets to raise capitalFOREIGN AFFILIATES IN SELECTED broadens the financial alternatives availableINDUSTRIAL COUNTRIES

US$ blllions to those companies and decreases their de-Fiscal Fiscal pendence on the parent firms (or interna-

-__2__2_89 __ 988-89 tional markets) as sources of finance. ForeignUS parent firms (2816) 231. affiliates often rank among the biggest com-

Other US firms 22.8 6.1 panies listed on local stock markets. In Paki-(3 0) (5.6)

Local entities 40 1.9 94.0 stan, five of the 15 largest companies (ranked(53.3) (86.1) by market capitalization) are foreign affiliates.

Other 1 13.4 -14.0(I5O) - As of June 1991, Lever Brothers (Pakistan) CHART 10

- Value is negat.ve. Limited, in which the parent firm holds a 65 COMPONENTS OFNote: Figures in parentheses are percentage oftotal. US FDI TO LATINSource: US Department of Commerce, U.S. Direct Investment percent stake, had the largest market capitali- AMERICA,Abroad, 1989 Benchmark Survey, Final Results (Washington, DC,US Government Pnnting Oice, 1992). zation of any company quoted on the Karachi 1989-92

Stock Exchange.billion, were generated by a stock of FDI (on Locally raised capital would not be cap- Equity 26%

a historical cost basis) of about $53 billion. In- tured in FDI data reported for balance of

tercompany loans accounted for only 5 per- payments because they reflect only trans- inter-

cent of US cumulative FDI oufflows to Latin border transactions. Even so, it represents a Renvested lomnposn%

America in 1989-92. potentially important means of financing in- eamings 69%

In contrast, US FDI in Eastern Europe has vestments, judging from data for US-based Source: US. Department of Commerce,

been predominantly equity investment. Most affiliates in industrial countries. At the close Syo Carert Busiress, Jul 993.

FDI in this region is recent, as these countries of fiscal 1989, for example, more than half ofbegan to liberalize investment regimes only in the financial position of foreign affiliates ofthe late 1980s. Consequently, their stock of US-based transnational corporations in se-capital is much smaller than stocks in Latin lected industrial countries was attributed toAmerica. Furthermore, given the uncertain external funds raised in the host country,economic conditions in those countries, com- though not necessarily in stock markets.panies that invest there tend to have a long- The existence of stock markets allowingterm perspective on investments and are of- participation by foreign investors may alsoten willing to forgo immediate profits for encourage transnationals to acquire domes-long-term benefits associated with "first- tic firms listed on the domestic market.mover" advantages and capturing market These firms may be particularly attractive toshares. For US FDI in East and South Asia, data foreign investors because they are likely toare scarce but it appears that reinvested earn- be among the best-known firms of the hostings accounted for about half of cumulative country and their financial performance canoutflows in 1989-92 and equity investments be evaluated more accurately than that offor the rest. other domestic firms because they must ad-

Locally raised capital represents another here to accounting principles laid down bysource of financing for investment in devel- the stock exchange.

FEBRUARY 1994 23

TABLE A. I

TOTAL EXTERNAL DEBTUS$ millions

Country group orcountry 1986 1987 1988 1989 1990 1991 1992

DRS reporters 1,217,622.8 1,381,176.1 1,373,220.1 1,411,347.4 1,518,449,4 1,605,932.6 1,662,170.3Long-term 995,858.2 1,142,448.5 1,128,135.5 1,140,556.3 1,209,841.3 1,269,324.9 1,308,224.8Oficial 417,451.6 511,935.6 519,135.2 539,020.9 600,014.5 651,961.3 665,607.4Private 578,406.6 630,512.9 609,000.4 601,535.3 609,826.8 617,363.6 642,617.6

Short-term 179,139.2 95,872.2 209,973.0 238,723.9 273,956.6 298,479.3 315,680.7IMF credit 42,625.4 42,855.4 35,1 1 1.8 32,067.3 34,651.5 38,128.4 38,264.7

Sub-SaharanAfrica 138,514.5 65,191.6 166,310.2 173,843.4 191,127.5 195,531.5 194,263.4East Asia and Pacific 199,753.1 223,584.2 225,340.0 227.,1 62.8 259,805.9 293,815.1 320,189.3Europe and Central Asia 202,032.7 237,359.8 237,425.6 256,456.5 286,408.4 310,547.0 329,056.4Latin America and the Caribbean 434,226.4 474,294.4 455,740.1 450,957.1 473,729.4 488,424.6 496,329.8Middle Eastand NorthAfrica 160,422.5 184,127.5 186,583.3 194,203.7 188,382.6 191,403.1 188,977.9SouthlAsia 82,673.4 96,618.6 101,821.3 108,723.9 118,995.6 126,211.1 133,353.4

Severely indebted middle-income 466,887.5 526,976.4 512,938.0 521,809.0 557,050.4 575,192.8 570,818.3Albania 0.0 0.0 0.0 74.4 348.6 500.7 624.5Algeria 22,634.1 24,395.5 26,037.5 26,999.2 27,636.8 27,918.6 26,349.4Angola 2,834.5 4,431.8 5,061.0 6,768.4 8,181.4 8,717.5 9,644.8Argentina 52,450.0 58,458.0 58,740.8 65,256.7 62,233.3 65,396.4 67,569.2Boliva 5,574.9 5,836.2 4,901.6 4,135.5 4,278.2 4,076.5 4,242.7Brazil 113,704.7 123,837.1 115,711.5 111,373.8 116,417.0 117,350.0 121,110.2Bulgara 5,866.0 8,255.5 8,933.9 10,123.6 10,867.5 1 1,969.7 12,145.9Cameroon 3,703.3 4,031.7 4,220.1 4,790.3 5,990.1 6,276.3 6,554.4Congo 3,492.0 4,295.8 4,085.1 4,257.1 4,922.4 4,832.6 4,750.9C6te d'lvoire 10,550.3 12,576.4 12,577.7 14,057.9 16,621.9 17,557.0 17,997.2Ecuador 9,334.4 10,473.4 10,745.1 1 1,317.4 12,109.3 12,468.1 12,279.9Jamaica 4,187,2 4,696.3 4,532.5 4,536.3 4,628.1 4,480.3 4,303.6Jordan 5,018.7 6,390.6 6,665.9 7,329.2 8,269.3 8,649.0 7,976.4Mexico 100,880.8 109,460.2 99,204.2 93,816.5 105,958.3 115,290.6 113,378.3Morocco 17,889.1 20,776.4 21,01 1.4 21,601.3 23,477.7 21,304.3 21,418.1Panama 4,859.3 5,630.3 6,066.4 6,318.1 6,678.6 6,732.8 6,485.2Peru 14,887.6 17,490.3 18,245.2 18,583.3 20,068.4 20,719.8 20,297.0Poland 36,670.2 42,632.1 42,131.5 43,125.0 49,395.0 52,775.4 48,521.0Syrian Arab Repuslic 12,919.4 15,998.8 16,384.6 16,882.5 16,447.8 16,867.1 16,513.2

Severely indebted low-income 156,715.3 188,109.5 193,634.3 198,476.5 201,879.2 206,173.3 204,086.0

Moderately indebted low-income 123,029.4 145,783.6 151,688.1 161,421.8 185,730.2 201,502.1 217,304.0

Moderately indebted middle-income 235,517.1 266,219.5 267,190.2 280,258.2 305,062.4 321,222.4 344,213.3

Selected countries' 417,774.5 469,834.1 472,767.2 475,867.8 512,964.2 551,847.7 587,393.8Chile 21,144.5 21,489.4 19,581.9 18,032.3 19,227.2 17,946.9 19,360.1China 23,745.8 35,296.4 42,362.4 44,812.1 52,554.4 60,851.1 69,320.6Colombia 15,362.4 17,007.9 16,994.7 16,877.9 17,231.7 17,337.9 17,203.6Egypt 46,342.1 52,196.8 52,670.6 51,696.6 40,435.0 41,007.5 40,430.6Hungary 16,907.2 19,583.8 19,602.7 20,390.1 21,269.5 22,777.1 21,899.5India 48,286.5 55,753.0 58,403.6 63,810.4 68,697.6 71,64 .9 76,982.7Indonesia 40,070.7 49,738.5 51,415.0 53,494.2 67,011.1 76,110.2 84,384.6Korea, Rep. of 46,724.5 39,807.8 35,716.5 32,799.2 34,987.7 39,633.9 42,998.9Malaysia 21,879.7 22,839.4 18,567.3 16,278.2 16,062.9 17,780.1 19,836.8Nigeria 23,402.6 30,654.9 31,245.8 31,996.7 34,537.7 34,436.1 30,998.3Philippines 28,231.1 29,808.3 29,023.0 28,507.5 30,424.0 32,224.5 32,588.9Thaland 18,505 1 20,305.2 21,664.3 23,432.1 28,207.5 35,828.4 39,423.8Turkey 32,832.0 40,782.9 40,781.8 41,363.6 49,147.5 50,226.0 54,772.3Venezuela 34,340.3 34,569.8 34,737.6 32,376.9 33,170.4 34,046.1 37,193.1

Note: Table includes data for DRS reporters only. See taDle A. I I for country classifications.a. Most of these countries are also included in the indebted country groups.Source: World Bank, Debtor Reporting System.

24 FINANCIAL FLOWS AND THE DEVELOPING COUNTRIES

TAbLE A.2

AGGREGATE NET LONG-TERM RESOURCE FLOWSUS$ millions

Type offnance 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992

Officialdevelopmentfinance 34,558.6 34,802.6 33,619.4 39,656.6 43,959.4 43,914.3 40,750.0 41,139.7 59,123.5 62,912.0 54,581.3Oficial development assistance 22,883.7 21,894.2 21,517.6 26,692.2 27,831.6 32,160.5 31,582.4 33,814.7 43,708.8 46 793.7 48,3 5.0Officialgrants, 10,854.3 10,404.7 12,572.9 15,617.7 16,022.3 16,690.7 18,257.4 19,022.5 28,458.3 32870.0 34,460.5Official concessonary loans 12,029.4 11,489.5 8,944.7 11,074.5 11,809.3 15,469.8 13,325.0 14,792.2 15,250.5 13.923.7 13,854.5

Bilateral 8.259.6 7,918.5 5,252.9 7,081.0 7,321.5 10,021.4 7,961.7 9,480.7 8,943.5 7281.8 6,497.2Multilateral 3,769.8 3.571.0 3,691.8 3,993.5 4,487.8 5,448.4 5,363.3 5,311.5 6,307.0 6.641.9 7,357.3

Official ronconcessionary loans I 1,674.9 12,908.4 12,101.8 12,964.4 16, 127.8 11,753.8 9,167.6 7,325.0 15,414.7 16,118.3 6,266.3Bilaterdl 3,935.8 5,221.5 3,294.1 4,049.9 5,437.1 2,218.9 3,407.6 928.8 6,928.9 7908.0 1,435.6Multilateral 7,739.1 7,686.9 8,807.7 8,914.5 10,690.7 9,534.9 5,760.0 6,396.2 8,485.8 8,210.3 4,830.7

Private loans 45,054.4 30,734.7 27,385.4 20,602.8 9,190.0 8,589.8 10,996.2 10,151.8 12.863.8 13791.6 41,709.7Bonds 4,155.6 1.632.3 -1 17.4 5,610.8 753.7 1,029.9 2,938.8 4,221.9 2,251.4 7,412.3 6,344.7

Commercial banks 32,862.5 23,433.2 23,015.6 7,769.0 1,765.7 1,082.8 7,901.5 3,918.0 -2,464.8 5,418.0 18,542.3Other private 8,036.3 5,659.2 4,487.2 7,223.0 6,670.6 6,477.1 1 55.9 2,011.9 13,077.2 961.3 16,822.7

Foreign direct investment 11,394.5 8,552.5 9,437.4 11,336.1 10,141.8 14,534.1 21,204.4 24,710.2 26,339.8 36876.4 47,267.5

Portfolio equity flows 0.0 0.0 150.0 1 38.0 636.0 761.0 1.096.0 3,485.9 3,773.6 7,552.2 1 3,072.9

Aggregate net flows 91,007.5 74,089.8 70,592.2 71,733.5 63,897.2 67,799.2 74,046.6 79,487.6 102,100.7 121 132.2 156,631.4

Aggregate net transfers 23,284.8 9,708.4 2,046.8 586.6 -5,065.0 -2,921.7 5,448.0 2,265.6 25,462.4 44462.7 79,613.6

Memo itemsPrivategrants 2,300.0 2,300.1 2,600.0 2,900.0 3,300.1 4,000.0 4,300.1 4,000.0 4,890.0 5,199.8 5,499.9NetuseofIMFcredt' 7,488.1 11,067.1 4,454.0 -155.0 -2,875.7 6,301.7 -5,491.9 -2,320.6 132.7 3,159.8 1,151.8

Realaggregatenetresourceflows 77,717.8 66,269.9 64,704.1 68,776.1 63,897.2 70,185.5 72,240.6 78,467.5 100,591.8 114708.5 144,095.1Importprce index 1 17.1 i 1.8 109.1 104.3 100 0 96.6 102.5 101.3 101.5 105.6 108.7

Note Tab e ncludes data for DRS reporters on y. See table A.a. Excludes technical cooperaton grants.b. ncudes IMF Trust Fund and Enhanced Structural Adjustment Facilty.Source World Bank, Debto- Reporting System: OFCD; data on fore gn direct nvestment are from the I M F.

FEBRUARY 1994 25

STA"ISTIC4L APPENDIX

TABLE A.3BANK AND TRADE-RELATED NONBANK CLAIMSUS$ n7illions

1 992Q4

Trade-relatedBank Guaranteed nonbank

Country group or country 1988 1 989 1 990 1991 1 992Q2 Total claims claims claims

All developing countries 723,438 723,524 765,893 797,026 820,050 828,155 694,753 108,340 133,402Sub-Saharan Africa 57,395 55,125 60,373 58,093 57,463 55,080 34,322 9,004 20,758East Asia and Pacific 138,417 136,632 165,408 189,044 196,476 212,21 1 93,306 13,812 18,905Europe and CentralAsia 145,431 157,439 184,089 188,143 193,889 190,723 162,295 34,510 28,428LatinAmerica and the Caribbean 272,355 258,312 238,612 242,205 249,830 251,102 217,583 21,943 33,5 9Middle Eastand NorthAfrica 90,135 94,521 94,922 98,571 99,715 94,858 66,639 23,776 28,2 9SouthAsia 19,705 21,495 22,489 20,970 22,677 24,181 20,608 5,295 3,573

Severely indebted middle-income 302,778 293,670 289,806 294,549 300,165 298,948 248,653 37,825 50,295Albania 1 6 396 464 403 398 414 396 6 18Algeria 19,860 20,285 21,014 21,583 21,061 21,980 19,082 13,530 2,898Angola 1,665 2,168 2,370 2,669 2,913 3,275 2,145 648 1,130Argentina 38,693 35,787 34,475 35,797 36,598 38,655 33,534 2,320 5.121Bolivia 716 453 463 512 672 555 295 45 260Brazil 83,978 77,887 76,167 70,917 74,316 73,906 64,042 2,780 9,864Bulgaria 7,703 8,324 9,348 8,898 8,507 8,126 7,419 481 707Cameroon 2,202 2,194 2,757 2,845 2,781 2,770 1,585 659 1,185Congo 1,645 1,537 1,724 1,622 1,615 1,606 980 152 626C6te d'lvoire 4,122 4,186 4,379 4,042 4,137 3,783 2,508 270 1.275Ecuador 5,528 5,202 4,773 4,463 4,466 4,076 3,607 419 469Jamaica 807 983 975 737 761 730 489 130 241Jordan 3,157 3,217 3,657 3,221 3,289 2,851 2,065 937 786Mexico 75,036 75,507 62,684 72,426 74,518 74,035 65,719 10,562 8,316Morocco 7,200 7,201 8,002 8,027 8,097 7,820 5,366 2,172 2,454Panama 21,706 20,006 22,855 22,916 22,601 22,537 22,157 157 380Peru 6,486 5,967 6,179 6,138 5,935 5,783 3,4i4 320 2,369Poland 20,789 21,044 26,301 26,274 26,503 25,120 13,152 2,220 11,968Syrian Arab Republic 1,369 1,326 1,219 1,059 997 926 698 17 228

Severely indebted low-income 57,231 55,673 57,506 55,291 55,412 50,443 30.196 6,685 20,247

Moderately indebted low-income 45,161 48,304 59,231 62,074 66,748 71,374 62,139 9,230 9,235

Moderately indebted middle-income 144,799 146,918 155,178 154,490 158,489 161,839 143,818 35,260 18,021

Selected countries, 240,385 236,512 259,745 278,430 288,780 302,408 263,123 33,571 39,285Chile 11,548 9,880 9,823 8,884 9,829 10,837 10,217 711 620China 27,631 26,682 34,430 41,381 40,615 47,935 44,114 5,256 3,821Colombia 9,255 8,841 8,889 8,431 8,341 8,615 7,133 1,347 1,482Egypt 17,642 18,689 14,224 13,246 13,276 10,840 4,424 2,538 6,4 6Hungary 11,8 5 12,219 12,359 11,144 10,450 9,217 8,648 907 569India 14,342 15,950 15,640 14,837 16,323 18,130 15,887 3,229 2,243Indonesia 23,965 25,507 34,850 39,113 42,262 45,489 40,225 3,672 5,264Korea, Rep. of 31,480 31,503 36,216 41,455 43,786 45,056 42,637 1,692 2,419Malaysia 10,037 9,141 9,252 9,991 10,473 11,965 10,924 659 1,041Nigena 13,627 11,865 12,796 12,040 1 1,581 10,386 4,737 1,852 5,649Philippines 14,507 11,914 11,969 11,231 10,420 10,182 7,465 874 2,7 7Thaiand 10,559 12,376 18,035 24,201 27,230 29,686 27,544 962 2,142Turkey 16,630 16,705 22,230 23,002 24,266 24,234 20,831 7,662 3,403Venezuela 27,347 25,240 19,032 19,474 19,928 19,836 18,337 2,210 1,499

Offshore banking centers 78,778 89,226 1 16,422 121,323 129,344 138,519 136,152 4,332 2,367Oil exporters 158,164 167,188 176,696 183,627 187,934 188,049 154,431 43,81 1 33,6 8DRSreporters 115,496 122,416 132,264 137,694 142,165 145,053 120,730 41,707 24,323

DRS reporters 677,505 673,370 718,257 747,332 770,509 783,069 663,911 105,114 119,158

Note: See table A. I I for country classifications.a. Most of these countries are also included in the indebted courtry groups.Source. OECD; Bank for International Settlements, Staitistics on Extemal Indebtedness.

26 FINANCIAL FLOWS AND THE DEVELOPING COUNTRIES

STATISTICAL APPENDIX

TABLE A.4COMMERCIAL BANK CLAIMS ON DEVELOPING COUNTRIESUS$ millions

Claims Liabilities

Country group or country 1991 1 992Q4 1 993Q I 1993Q2 1991 1992Q4 1 993Q I 1993Q2

All developing countries 656,591 691,385 698,999 704,731 579 914 562,488 556,786 549,913Sub-Saharan Africa 36,339 34,614 32,939 32,599 31,320 29,369 29,674 28,944EastAsiaand Pacfic 171,099 191,665 195,385 202,709 136,565 137,615 129,206 123,426Europe and Central Asia 153,832 155,353 156,472 158,134 76,047 87,222 87,871 92,038LatnAmericaandtheCaribbean 212,922 224,903 227,707 225,903 144,419 140,361 139,414 136,662Middle East and North Africa 62,027 61,187 63,179 62,174 145,018 127,657 127,968 127,065SouthAsia 20,372 23,663 23,317 23,212 46,545 40,264 42,653 41,778

Severely indebted middle-income 248,010 254,234 255,434 252,355 155,134 155,361 155,041 151,027Albania 393 396 417 407 28 67 71 95Ageria 15,016 13,904 14,731 14,119 3,353 3,128 3,526 3,082Angola 1,623 2.113 1,996 1,897 478 748 627 569A-gentina 31,282 33,566 33,805 29,881 20,948 19,942 21,121 20,193Bolivia 260 302 286 215 870 717 702 701Brazil 61,428 64,132 65,146 66.310 24,372 26,826 26,979 26,198Bulgaria 8,196 7,419 7,286 6,956 1,027 1,402 1,269 1,191Cameroon 1,744 1,500 1,534 1,431 704 720 706 630Congo 1,093 967 881 969 327 349 418 346Cote dIlvoire 2,765 2,475 2,176 2,238 1,875 1,991 2,008 1,734Fruador 3,919 3,601 3,433 3,363 2,805 2,841 2,648 2,322Jamaica 421 485 442 450 611 662 611 643Jordan 2,183 1,832 1,788 1,747 7,018 6,877 6,767 6,552Mexico 65,064 67,785 69,242 70,731 28,170 26,164 26,329 26,161Morocco 5,416 5,239 4,982 4,845 4,404 5,723 5,441 5,536Panama 29,123 31,339 30,641 30,797 44,253 40,525 40,113 39,293Peru 3,644 3,388 3,225 3,020 3,658 3,897 3,862 3,877Poland 13,622 3,093 12,768 12,292 5,137 7,522 6,468 6,590SyranArab Republic 818 69B 655 687 5,096 5,260 5,375 5,314

Severely indebted low-income 33,145 29,987 29,990 29,993 50,940 51,049 51,223 50,656

Moderately indebted low-income 51,878 60,686 61,310 61,352 29,886 31,899 32,253 30,425

Moderately indebted middle-income 131,653 136,656 136,960 137,568 84,814 87,466 86,447 86,754

Selected countries, 234,815 258,096 258,666 269,460 180,591 189,480 177,118 173,256Ch Ic 8,038 10,121 10,518 10,428 6,607 6,781 6,412 6,473China 37,107 42,676 39,007 42,735 46,843 48,171 41,044 39,046Colombia 6,610 7,260 7,373 7,501 8,838 8,242 7,930 8,109Egypt 5,773 4,269 4,082 3,969 20,458 22,321 22,772 22,593Hungary 10,506 8,648 8,967 8,774 3,742 2,840 2,550 2,387Irdia 12,457 15,456 14,970 14,646 10,058 6,797 7,630 7,133Indonesia 34,213 40,084 41,110 41,514 1 1,387 17,180 16,763 15,954Korea, Rep. of 39,155 42,653 44,214 46,445 10,482 15,180 16,167 15,741Malaysia 9,166 1,094 12,409 13,531 9,521 12,205 8,303 9,412Nigera 5,808 4,563 4,237 4,236 5,431 4,362 4,197 4,391Philippines 8,751 7,433 7,274 6,612 4,849 4,529 4,938 4,493Thai and 22,705 27,419 28,189 30,853 5,454 4,599 3,969 3,967Turkey 16,250 7,840 18,045 20,010 12,062 14,575 13,463 13,380Venezuela 18,276 8,580 18,271 18,206 24,859 21,698 20,980 20,177

Offshore banking centers 1,077,896 1,037,852 1,041,046 1,051,890 1,014,574 941,453 919,405 881,484Oilexporters 155,216 161,505 160,854 160,043 21 1,944 192,902 188,564 186,314DRS reporters 107,175 1 11,298 1 1,298 109,471 54,739 54,760 55,557 56,030

DRSreporters 766.180 773,514 777,713 792,101 602,008 593,615 585,162 576,671

None: See table A. I I for country class ficatons.a. Most of these countr es are also ncluded in the indebted country groupsSorce: gank for lnterrational Settements, Intematlonol Banklng end Financol Morket Developments.

FEBRUARY 1994 27

STA- KSTICAL APPENDIX

TABLE A.5COMMERCIAL BANK CLAIMS ON DEVELOPING COUNTRIES, BY COUNTRY OF ORIGINUS$ millions

France Germany5

Country group or country 1991 1992Q2 1992Q3 1992Q4 1992Q3 1992Q4 1993QI 1993Q2

All deveoping countries 81,481 82,975 89,B37 82,497 151,086 138,151 142,232 140,008Sub-Saharan Afnca 10,769 10,226 10,782 9,681 7,781 7,145 7,335 7,131EastAsiaandPacifc 17,181 18,128 21,776 19,612 17,837 16,301 17,039 16,961Europe and Central Asia 16,932 17,537 18,917 18,251 68,273 61,446 63,120 62,754LatinAmnericaandtheCaribbean 17,290 17,857 18,371 17,260 35,166 33,038 34,277 32,987Middle East and North Africa 17,371 16,962 17,467 15,524 12,536 11,724 11,856 11,458SouthAsia 1,939 2,265 2,523 2,169 9,493 8,498 8,604 8,716

Severely indebted middle-income 31,421 31,550 32,253 29,694 42,354 39,022 39,768 38,137Albania 66 66 63 44 .

Algeria 5,775 5,252 5.287 4,613 1,919 1,648 1,601 1,490Angola 730 732 744 745 ..

Argentina 2,335 2,424 2,298 2,350 7,602 7,357 7,631 7,212Bolivia 18 18 18 19 312 310 307 302Brazil 7,885 7,810 8,292 7,693 11,293 10,656 10,973 10,587Bulgaria 654 648 664 621 2,905 2,524 2,548 2,367Cameroon 809 736 768 685 969 866 860 764Congo 697 705 714 669Cote d'lvoire 1,936 1,956 2,065 1,793 402 348 347 334Ecuador 164 157 152 167 636 585 608 549Jamaica 14 14 12 10Jordan 1,020 778 1,095 746 556 514 439 421Mexico 2,357 2,801 2,849 2,610 4.896 4,470 4.739 4,727Morocco 2,199 2,173 2,296 2,157 1,256 1,129 1,139 1,075Panama 2,530 3,012 2,596 2,623 1,514 1,473 1,428 1,543Peru 640 623 629 571 1,117 1,014 1,020 913Poland 1,321 1,399 1,425 1,308 6,401 5,607 5,605 5,341Syrian Arab Republic 271 245 285 271 577 521 523 512

Severely Indebted low-income 7,139 7,050 7,384 6,411 7,036 6,301 6,368 6,390

Moderately indebted low-income 4,866 4,911 5,623 4,988 12,200 11,142 11,513 11,374

Moderately indebted middle-income 12,704 12,221 13,445 12,854 52,598 47,993 49,609 49,201

Selected countries, 23,758 23,793 26,742 23,985 42,264 38,626 39,879 39,498Chile 437 523 539 543 1,587 1,651 1,777 1,696China 3,769 3,937 4,645 4,5 2 3,108 2,381 2,686 2,523Colombia 512 575 575 589 1,123 1,054 1,044 1,107Egypt 2,437 2,341 2,364 1,972 3,046 2,650 2,641 2,568Hungary 217 193 175 153 4,294 3,668 3,936 3,709India 1,362 1,583 1,783 1,451 5,961 5,367 5,456 5,302Indonesia 2,537 2,246 2,692 2,431 3,944 3,705 3,956 3,938Korea, Rep. of 4,573 4,885 5,904 4,664 3,837 3,778 3,746 3,724Malaysia 455 470 712 659 1,100 1,093 1,209 1,266Nigeria 1,500 1,258 1,295 1,129 904 745 702 663Philippines 1,389 888 894 811 453 506 494 616Thailand 1,276 552 1,701 1,668 2,657 2,600 2,643 2,686Turkey 1,928 1,959 2,077 2,093 7,348 6,828 6,829 7,105Venezuela 1,367 1,384 1,386 1,309 2,901 2,602 2,760 2,596

Offshore bankingcenters 35,166 37,079 42,766 40,286 65,082 66,516 70,023 71,593Oil exporters 21,848 2 ,788 22,671 21,364 44,831 41,575 42,893 42,150

DRSreporters 17,114 16,491 17,633 16,221 41,991 38,616 39,733 38912

DRS reporters 75,903 77,252 83,040 76,047 142,379 130,552 134,325 132,067

28 FINANCIAL FLOWS AND THE DEVELOPING COUNTRIES

STATISTICAL APPENDIX

Italy Japanb

Country group or country 1991 1992Q2 1992Q3 1992Q4 1987QI 1 987Q3 1988Q I

All developing countries 17,666 18,264 18,086 18,164 71,067 72,511 79,810Sub-Saharan Africa 881 848 736 818 647 784 819East Asia and Pacific 113 95 107 84 21,294 21,251 24,973Europe and Central Asia 7,960 8,583 8,711 8,958 10,244 11,227 12,014Latin America and the Caribbean 5,597 5,754 5.543 5,452 33,623 33,776 35,617Middle East and North Africa 884 826 729 708 3,600 3,593 3,818South Asia 2,230 2,159 2,260 2,145 1,659 1,880 2,569

Severely indebted middle-income 7,255 7,095 6,850 6,667 36,070 36,705 39,422AlbaniaAlgeria .. .. .. .. 2,695 2,690 2,852AngolaArgentina 1,520 1,568 1,584 1,657 5,227 4,982 5,6 11Bolivia 4 4 5 5 3 2 3Brazil 947 923 833 827 9,241 9,132 9,723Bulgaria 567 585 640 589 952 1,132 1,172Cameroon ..

CongoCote d'lvoire 31 22 24 12 154 156 160Ecuador 152 133 185 167 801 791 879Jamaica .. .. .. 17 17 18Jordan .. .. .. .. 23 19 17Mexico 1,903 1,869 1,734 1,579 10,495 11,058 11,372Morocco 490 387 388 384 485 471 525Panama .. .. .. 4,964 5,246 6,045Peru 101 123 87 102 337 335 337Poland 1,539 1,480 1,370 1,345 676 674 708Syrian Arab Republic ..

Severely indebted low-income 850 826 712 806 2,635 2,699 2,929

Moderately indebted low-income .. . .. 6,667 6,956 8,089

Moderately indebted middle-income 6,511 7,176 7,398 7,713 16,640 17,225 18,284

Selected countries' 2,231 2,280 2,123 2,161 32,384 32,638 37,224Chile 128 132 126 131 1,532 1,570 1,647China .. . .. .. 2,470 3,132 4,578Colombia 110 158 146 141 1,259 1,189 1,216Egypt .. .. .. .. 17 20 20Hungary 353 278 232 214 3,228 3,391 3,643India .. .. .. .. 1,409 1,626 2,190Indonesia .. .. .. 5,214 5,289 5,841Korea, Rep. of .. .. .. 5,720 4,777 5.413Malaysa .. .. .. .. 2,949 2,838 3,041Nigeria 850 826 712 806 272 304 297Philippines 113 95 107 84 2,340 2,282 2,583Thailand .. .. .. .. 2,187 2,429 2,929TurkeyVenezuela 678 791 800 786 3,787 3,791 3,826

Offshore bankingcenters 20,859 24,058 23,594 23,198 12,673 15,070 17,447Oil exporters 6,603 7,288 7,457 7,891 12,039 12,623 13,178

DRS reporters 6,603 7,288 7,457 7,891 11,475 12,011 12,587

DRS reporters 15,435 16,105 15,826 16,019 78,053 79,921 88,271

(toble continues on next poge)

FEBRUARY 1994 29

STAT',ISTIC,AL_ APPEN'DIX

TABLE A.5COMMERCIAL BANK CLAIMS ON DEVELOPING COUNTRIES, BY COUNTRY OF ORIGIN (CONTINUED)US$ mi/lions

Netherlandsa Switzerland

Country group or country 1990 1991 1992Q2 1992Q4 1989 1990 1991 1 992

All developing countries 15,538 18,713 20,619 21,011 20,610 24,563 24,212 24,642Sub-Saharan Africa 796 820 838 819 2,43 1 2,972 2,468 2,215East Asia and Pacific 2,093 4,021 4,604 3,577 1.787 2,117 2,904 3,517Europe and Central Asia 3,441 4,012 4,140 4,4 l7 7,442 8,262 7,283 5,569Lat n America and the Caribbean 6,823 7,280 8,611 9,512 6,379 7,870 8,195 9,458Middle East and North Africa 1,336 1,934 .681 1,782 2,169 2,768 2,836 3,1 64South Asia 1,050 647 746 905 402 574 527 718

Severely indebted middle-income 5,474 6,093 6,948 7,312 / 0,629 12,455 12,018 11,974Albania ... .. 39 83 62 62Algeria 550 765 722 688 30 338 307 298Angola ... ,73 97 63 106

Argentina I, 07 1,029 .329 .439 1,207 1,414 .41 1.604Bolivia I..,. . 0 12 / 2 16

Brazil I, 02 1,321 .639 2,003 2,197 2,862 2,812 2,821Bulgaria ...... 444 482 445 248Cameroonr. .... 46 6 1 5 I 43Congo . .... 2 2 4

COte dIvoire ...... I i 104 .11 1 00Ecuador 319 30i 363 257 72 107 125 132Jamaica .. ,...13 21 lB 8Jordan .. ,...89 93 93 106Mexico 1,697 1,853 2,017 2,168 1,322 1,716 1,864 2,369Morocco ..... ,103 .51 162 131

Panama 404 433 510 403 4,005 4,331 3,782 3,295Peru ...... 84 lOB 142 172

Polano 295 392 368 353 379 449 479 443Syran Arab Republic 35 23 IS /9

Severely indebted low-income 356 1 74 339 130 ,975 2,.148 2,170 1,963

Moderately indebted low-income 1,099 1,318 .,480 .,659 69 1,023 902 1,253

Moderately indebted middle-income 3,221 3,596 4,074 4,753 5,748 6,431 5,633 4,655

Selected countriesc 3,433 4,387 5,62 1 5,98/ 4.806 6,286 6,120 6,924Chile 389 .. 499 668 193 304 376 624China .. 413 515 435 276 363 438 495Co omba .. 277 346 537 194 181 168 291Egypt ...... 454 504 416 383Hungary 270 ... .2917 294 I/B 63India ,.....250 379 275 417Indonesia 1,099 1,318 1,480 1,659 189 246 193 317Korea, Rep. of -. 467 826 775 336 584 712 775Maaysia ...... 58 79 172 ISONigeria 149 ... .31 320 311 200Phi pprnes ...... 199 178 144 121Thailand 311 451 773 458 267 4Cr 552 633Turkey 436 545 576 731 1,202 1,865 1,579 617Venezuela 779 517 607 719 579 587 665 839

Offshore banking centers 13,944 10 492 12,125 2,305 18,1 16 2 .133 20,833 19,759Oil exporters 2,588 3,1 55 3,555 3,984 6,294 6.38 1 6,155 5,29

ORS repor-ters 2,482 2,705 3,055 3,28 1 4,305 4,612 4,131 2,942

DRS reporters 12,980 14 911 17,242 17,813 23,062 27,053 26,129 26,172

30 FINANCIAL FLOWS AND THE DEVELOPING COUNTRIES

STATISTICAL APPENDIX

United Kingdom, United Statesa

Country group or country 1989 1990 1991 Q2 1991 Q4 _i992Q3 1992Q4 1993Q I 1993Q2

All developing countries 53,007 45,643 42,708 46,717 68,945 70,799 73,512 77.229Sub-SaharanAfrica 7,435 7,084 6,531 6,766 2,486 2,543 2,408 2 132East Asia and Pacific 5,267 5,501 5,739 6,839 14,203 14,312 14,726 15,455Europe and Central As a 10,649 10.1,5 9,005 9,736 4,665 4,359 4.385 5 046LatnAmercaandtheCarbbean 23,623 16,856 16,271 17,475 43,835 45,746 48,C94 50,719Middle East and North Africa 4,459 4,347 3,644 4,203 2,863 2,759 2,760 2,806SouthAsia 1,574 1,700 1,518 1,698 893 1,080 1,139 1,071

Severely indebted middle-income 24,203 17,796 16,768 17,849 32,064 33,143 34,696 36&821AlbaniaAlgeria 784 760 655 921 497 486 513 503Angoa 32 33 31 22Argentina 3,343 2,352 2,244 2,738 5,159 5,777 6,357 6,860Bolivia 26 8 .. 6 1 1 18 39 22

Brazil 6,890 4.694 4,226 4,104 6,714 7,352 8,025 8239Bulgaria 532 473 209 233 SI 32 43 48Cameroon 71 71 73 78 2Congo 39 37 37 39C8ted'lvoire 292 247 148 155 16 18 19 21Eciador 750 546 542 514 513 457 495 467Jamaica 69 68 63 71 144 147 167 170Jordan 376 382 355 357 94 83 74 74Mexico 7,500 4,909 5270 5,611 17.223 17,277 17,437 18.871Morocco 447 401 308 351 457 461 426 453Panama 1,325 1,191 1,143 061 769 615 636 580Peru 464 276 295 342 161 195 221 245Poland ,182 1,279 1 107 ,188 242 216 234 260Syrian Arab Republ c 81 69 62 58 11 9 1 0 8

Severely indebted low-income 4,232 3.804 3,269 3,218 1,009 1,010 1,081 1,038

Moderately indebted low-income 2,776 2.917 2 775 3,420 2,731 2,806 3,281 3,227

Moderately indebted middle-income 10,51 1 9,501 8596 9,129 17,962 18,268 18,580 18,415

Selected countries' 13,062 12,654 1 1,994 13,301 26,088 26,307 27,331 28,006Chile 626 567 524 704 3,061 3,174 3,577 3,465China 938 1,025 843 1,031 347 430 426 499Colomb a 785 643 546 613 1,805 1,940 1,907 1,991Egypt 629 650 582 594 175 148 180 161Hungary 518 330 331 299 249 214 281 300India 1,100 1,219 1,083 1,164 412 462 497 469Indonesia 1,053 1,021 1,009 1,231 2,103 2,050 2,447 2,390Korea, Rep. of 1,130 1,343 1 560 1,842 4,230 4,032 4.050 4,169Malaysia 329 484 495 605 546 716 855 1,428Nigera 1,704 1,065 741 702 303 297 293 264Philippines 956 797 736 717 2,709 2,906 2,860 2,384Thailand 190 228 332 424 1,796 1,807 1,982 2,145Turkey 892 1,142 1,156 1,134 1.362 1,307 1,32C 1,593Venezuela 2,212 2.140 2,056 2,241 6,990 6,824 6,656 6,748

Offshore banking centers 27,622 28,509 25,393 26,343 25,304 26,187 23,342 23,824Oil exporters 12,503 10,864 9,136 10,096 10,304 10,054 9,898 10,155

DRS reporters 9,318 8,066 7,050 7,861 8,208 8,014 7,862 7,925

DRSreporters 49,093 41,055 38,079 41,917 66,695 67,539 69,954 73,510

Not availab eNoee: See table A. I I for country class fications.a. Conso idated cla ms of banks and their worldwide operations.b. Partly consolidated aggregate claims of banks and their wor dwide operations.c. Most of these countries are also included in the indebted country groups.Source: De Nederlandsche Bank, Quorterly Bulletmi, Banque de F-ance, Bulletin Trimestriel Deutsche Bundesbank, Zohlungsblonzssosstack; Banca d'ltalia, Bolletinc Economico; BanqueNationale Suisse, Les Bonques Suisse; Bank of England, Stotistical Abstrcct, Part l; Federal Financial Institutions Examination Counc , U.S. Country Exposure Lendmig Survey,

FEBRUARY 1994 31

STATISTICAL APPENDIX

TABLE A.6MATURITIES OF BANK CLAIMS ON DEVELOPING COUNTRIESUS$ millions

1992Q4

More thanLessthan I year and ess More than Estimated Short-term

Country group or country 1991 Total I year than 2 years 2 years Unallocated short-term (% of total)

All developing countries 574,610 587,304 294,582 43,151 225,634 23,937 243,947 42Sub-SaharanAfrica 34,376 32,415 18,194 1,997 10,483 1,741 14,154 44East Asia and Pacific 140,537 152,345 97,948 8,585 38,275 7,537 88,221 58Europe and Central Asia 149,803 147,332 57,290 16,323 67,623 6,096 38,449 26Latin America and the Caribbean 180,986 187,314 85,433 9,521 85,908 6,452 74,625 40Middle East and North Afnca 54,213 53,171 29,678 5,462 17,138 893 23,521 44SouthAsia 14,695 14,727 6.039 1,263 6,207 1,218 4,977 34

Severelyindebted middle-income 211,319 211,996 99,228 14,104 92,160 6,504 83,102 39Albania 251 382 353 12 8 9 353 92Algena 15,496 14,684 5,827 2,394 6,255 208 2,665 18Angola 1,518 2,01 1,434 125 439 13 1,235 61Argentina 26,784 30,260 14,416 1,400 13,427 1,017 13,332 44Bolivia 209 220 178 9 30 3 166 75Brazil 49,074 51,404 24,942 4,705 19,683 2,074 18,988 37Bulgaria 8,383 7,638 4,692 517 2,181 248 3,865 51Cameroon 1,631 1,424 605 148 652 19 462 32Congo 800 747 439 65 239 4 338 45Coted'lvoire 2,721 2,452 2,078 139 167 68 1,961 80Ecuador 3,425 3,043 1,606 150 1,151 136 1,424 47Jamaica 453 57 185 44 214 128 138 24Jordan 2,034 1,540 927 127 473 3 762 49Mexico 55,363 53,866 22,833 1,686 27,789 1,558 21,385 40Morocco 5,122 4,888 1,545 630 2,710 3 1,134 23Panama 21,270 21,39 11,287 1,024 8,456 624 10,117 47Peru 2,906 2,566 1,839 109 506 112 1,708 67Poland 13,248 12,363 3,662 797 7,713 191 2,779 22Syrian Arab Republic 631 546 380 23 67 76 290 53

Severely indebted low-income 26,887 24,487 11,622 1,815 10,149 901 9,373 38

Moderately indebted low-income 42,551 43,846 24,009 3,829 14,208 1,800 19,687 45

Moderately indebted middle-income 127,903 130,281 47,341 13,045 65,660 4,235 31,718 24

Selected countries 204,479 214,286 I13,878 13,708 75,595 1J, 05 98,950 46Chile 8,035 9,686 4,916 297 4,341 32 4,530 47China 26,749 30,198 14,925 1,754 11,933 1,586 12,764 42Colombia 6,260 6,996 3,042 456 3,293 205 2,501 36Egypt 5,499 4,129 2,432 386 1,290 21 1,847 45Hungary 0,758 8,843 2,219 959 4,907 758 1,071 12India 11,090 11, 01 4,066 987 5,453 595 3,237 29Indonesia 27,318 28,417 17,183 2,447 7,719 1,068 14,026 49Korea, Rep. of 34,254 38,812 27,716 2,187 6,515 2,394 25,706 66Malaysia 7,890 8,475 4,076 321 3,167 911 3,578 42Nigeria 5,523 4,154 1,325 324 2,355 150 1,024 25Philippines 8,763 6,873 3,140 234 3,038 461 2,836 41Thailand 9,500 22,959 15,848 1,279 4,837 995 14,765 64Turkey 15,093 15,455 7,898 1,686 4,644 1,227 6,515 42Venezuela 17,747 18,188 5,092 391 12,103 602 4,550 25

Offshore banking centers 459,164 486,01 1 404,983 9,576 58,696 12,756 392,433 81Oil exporters 128,322 132,496 56,063 13,804 60,082 2,547 39,022 29

DRS reporters 104,717 108,807 39,822 12,201 54,663 2,121 24,299 22

DRS reporters 560,928 574,122 285,201 41,896 225,724 21,301 235,799 41

Note: See table A. IM for country classifications.a. Most of these countries are a,so included in the indebted country groups,Source: Bank for International Settlements, The Maturity and Sectoral Distribution of Internotonal Bank Lending.

32 FINANCIAL FLOWS AND THE DEVELOPING COUNTRIES

TABLE A.7

FUNDS RAISED ON INTERNATIONAL CAPITAL MARKETSUS$ millions

Country group or country 1989 1990 1991 1992 1992Q2 1992Q3 1992Q4 1993Q1I 1993Q2 1993Q3

All developing countries 25,429 3 1,900 39,979 40,39 1 9,054 8,945 10.876 15,008 16,268 19,206Bonds 6,899 7,328 1 3.873 21,408 4,640 5,026 6,401 10,471 11,195 13,041Internadonal 4,345 5,380 10,067 13,656 3,774 2,769 3,635 6,643 8,341 9,685Foreign 2,554 1,948 3,806 7,753 866 2,257 2,766 3,829 2,854 3,355

Loans 1 8,529 24,572 26,106 18,983 4,414 3,91 8 4,475 4,537 5,072 6,165International 17,317 23,872 25,875 18,737 4,405 3,910 4,361 4,51 2 4,999 6,066Foreign 1,213 701 23 1 245 9 8 1 14 25 74 99

Sub-Saharan Africa 258 756 689 I1.273 470 45 1 39 .. 1 2East Asia and Pacific 8,273 14,808 18,228 16,687 3,225 4,510 5,223 5,206 6,31 7 6,391Europe ano Central Asia 10,441 10,247 7,191 9,642 2,159 2,535 3,0 13 5,921 2,857 4,949Latin Anerica and the Caribbean 2,051 4,242 8,688 9,518 2,990 1,709 2,501 3,667 7,044 7,627Middle East and North Africa 2,008 1 28 4,861 3,070 1 10 60 216 50 72South Asia 2,397 1,720 322 201 100 86 .1 55

Severely indebted middle-income 1,794 2,617 7,869 8,307 2,689 1,749 2,151 3,392 5,789 5,169AJbania , .. .. ,.

Algeria 397 6 1 . .

Angola - I115 325 325 .... 1 2

Argentina . .. 725 1,529 380 684 250 410 531 2,092

BoliviaBrazil 100 1,480 3,010 1,525 355 360 820 1,594 1,850

Bulgaria 580.........

Cameroon .. 100 . . . ..

Congo . , . .. ..

C6te dilvoire . . . .. ..

Ecuador . .. .. ..

Jamaica .. 30......

Jordan . ., .. ..

Mexico 310 2,350 5,568 3,374 450 650 1,541 2,162 3,664 1,215

Morocco 6 52 .. 60 .. 60Panama 238 ., .

PeruPoland 163 ,. 5 9 9Syrian Arab Republic . . ,

Severely indebted low-income 652 385 lOS 96 ... 96 .. 72

Moderately indebted low-income 5,204 7,338 6,130 2,957 645 1.146 551 426 773 991

Moderately indebted middle-income 8,245 9,458 4,798 7,641 2,178 1,656 2,291 3,192 2,958 4.997

Selected countries' 16,293 20,476 21,754 23,489 5,228 6,232 7,087 8,176 8,767 1 1,130Chile .. 285 .. 350 100 .. 250 ,. 333 342China 1,761 1,514 2,595 4,043 719 924 1,742 2,044 1,836 1,794Colombia 1,641 .. 200 ...... 56 325Egypt 500 .. ... .. .

Hungary 1,709 987 1,378 1,446 187 240 618 1,418 281 1,331India 2,047 1,242 226 201 100 86 .. 1 , 55Indonesia 2,701 5,462 5,639 2,641 505 1,015 521 426 773 836

Korea, Rep. of 1,322 3,982 6,437 5,204 990 1,612 1,322 1,117 1,893 1,228Malaysia 541 730 512 1,271 511 401 193 447 394 479

Philippines ., 715 ... ... 170 .. 275

Thailand 1,059 1,465 1.907 2,718 436 557 1,018 951 1,132 1,701

Turkey 3,013 2,498 2,280 4,580 1,246 1,396 1,422 1,330 1,344 920Venezuela .. 1,595 581 1,035 435 .. , 218 457 2,068

Offshore banking centers 4,038 4,634 2,491 2,058 855 157 643 1,786 1,288 910Oil exporters 3,923 6,862 5,923 4,445 760 85 100 434 605 2,152

DRS reporters 2,655 4,961 1,018 1,460 760 .. 100 279 485 2,080

OECD countries 341,669 308,764 368,375 392,920 99,055 101,596 91,746 141,008 137,236 127,1I00Multilateral institudons 1 2,932 15,418 15,000 20,874 4,412 4,218 6,266 7,930 3,157 5,583Other 555 644 1,006 1,961 1,019 320 466 184 1,423 1,084

Totalb 385,055 361,489 432,470 458,275 1 14,430 1 15,251 109,997 165,925 159,412 153,908

Noft available.Note: See table A. I I for country classifications.a. Most of these countries are also included in the indebted country groups.b. Includes all developing countries, offshore banking centers, OECD courntries, multilateral institutions, and the category "other."Source: OECD, Financiol Stotistics Monthlf, Part I.

FEBRUARY 1 994 33

STAT ISTICAL APPENDIX

TABLE A.8SECONDARY MARKET DEBT PRICESPercentage offace value

Country group or country 1991 Q2 1991 Q3 1991 Q4 1992Q I i992Q2 1992Q3 1992Q4 1993Q I 1993Q2 1993Q3 1993Q4

Severely Indebted middle-income 32 37 34 37 39 39 37 37 44 42 52Albania .. .. .. .. .. 5Algeria 84 86 91 83 87 92 91 95 100 0 64Angola 25 20 20 20 24 25 22 20 18 18 18Argentnab 27 39 38 42 50 50 48 50 53 61 66Bolivia I1 9 11 10 12 I5 16 16 16Brazil' 34 36 31 36 33 33 30 30 39 46 46Bulgaria IS 21 20 18 17 16 13 14 21 26 42Cameroon .. IS 13 10 12 12 13 14 13 15Congo 7 4 4 4 5 6 6 6 8 9 9C6te dIlvoire 7 8 9 8 9 7 5 6 8 13 18Ecuadord 22 26 24 22 30 27 28 27 32 34 5 1Jamaica 70 75 76 74 74 74 71 76 79 76 76Jordan 22 25 30 30 34 34 35 35 35 44 52Mexico, 56 60 62 63 65 66 65 70 73 76 82Morocco 48 53 47 42 46 47 47 52 67 72 80Panama 13 27 21 28 32 33 29 30 32 38 56Peru 7 17 13 14 IS IS 19 24 32 43 69Poland' 29 26 23 20 23 26 25 28 32 35 50

Other selected countriesChile 88 88 90 88 89 91 91 92 93 94 94Costa Ricag 47 52 SI SI 59 63 60 64 68 75 80Egypt 45 45 46 46 47 45 45 46 46 46 46Honduras 20 20 27 27 31 33 35 31 31 31 31Hungary 73 65 .. .. .. .. .. ..

Nicaragua 4 9 8 8 9 7 7 8 10 10 1 0Nigeria .. .. .. 39 40 34 39 42 42 53 59Philippinesh 50 54 5 1 S l 59 57 57 64 68 76 81Senegal 42 41 43 38 37 0 0 23 0 32 38Uruguay 59 70 75 70 70 75 75 65 72 80 80Venezuelai 62 70 68 58 63 62 57 59 68 70 71

Not available.Note: Bid prce.a. Weighted by commercial bank debt outstanding (Syria is not included in these calculabons).b. Guaranteed Refinancing Agreement (GRA). Pnces after March 1993 refer to par bonds offered under the Brady initiatve.c. Multi-Year Deposit Facility Agreement (MYDFA).d. Multi-Year Refinancing Agreement (MYPA).e. Pnces after February 1990 refer to par bonds offered under the Brady initiative.f. Prices after August 1990 refer to par bonds offered under the Brady iniative.g. Prces after May 1990 refer to Seres A par bonds offered under the Brady initiative.h. Public sector restructured debt, including Central Bank of the Philippines. Prices after january 1990 refer to restructured loans offered under the Brady initiative.i. Prices after December 1990 refer to par bonds offered under the Brady initiative.j. 1988 Debt Deferral and Restructuring Agreement (DDRA).Source: Salomon Brothers, Euroweek, LDC Debt Report, Intemational Financing Review, and World Bank data.

34 FINANCIAL FLOWS AND THE DEVELOPING COUNTRIES

STATISTICAL APPENDIX

TABLE A.9NET FOREIGN DIRECT INVESTMENT FLOWS TO DEVELOPING COUNTRIESUS$ millions

Country group or country 1986 1987 1988 1989 1990 1991 1992

DRS reporters 10,141.8 14,534.1 21,204.4 24,710.2 26,339.8 36,876.4 47,267.5Sub-Saharan Afnca 684.5 1,392.9 1,133.8 2,607.9 856.0 1,774.0 1,613.5East Asia and Pacific 3,546.3 4,486.5 7,602.1 9,085.9 11,038.2 14,029.5 20,487.5Europe and Central Asia 844.1 1,302.3 2,260.4 3,480.9 4,711.7 7,011.5 8.529.6Latin Amenca and the Caribbean 3,553.4 5,777.2 7,999.2 7,082.8 7,668.9 12,374.6 14,506.5Middle East and North Africa 1,253.0 1,167.9 1.882.6 1,965.8 1,595.7 1,211.2 1,564.4South Asia 260.5 407.3 326.3 486.9 469.3 475.6 566.0

Severely indebted middle-income 2,909.9 5,104.0 7,258.5 6,046.8 5,658.1 9,814.8 13,004.2Albania 0.0 0.0 0.0 0.0 0.0 0.0 0.0Algeria 5.3 3.7 13.0 12.1 0.3 1 1.6 12.0Angola 234.0 119.0 131.0 200.0 -334.8 664.5 288.0Argentina 574.0 -19.0 1,147.0 1,028.0 1,836.0 2,439.0 4,179.0Bolivia 10.0 38.1 -10.1 -24.4 27.2 52.0 93.1Brazil 320.0 1,225.0 2,969.0 1,267.0 901.0 972.0 1,454.0Bulgaria 0.0 0.0 0.0 0.0 4.0 56.0 42.0Cameroon 19.0 12.0 67.3 0.0 -62.3 -21.1 10.0Congo 22.4 43.4 9.1 0.0 0.0 0.0 0.0Cote d'lvoire 70.7 87.5 51.7 40.8 47.7 46.1 49.1Ecuador 70.0 75.0 80.0 80.0 82.0 85.0 85.0Jamaica -4.6 53.4 -12.0 57.1 137.9 127.0 86.5Jordan 22.8 39.5 23.7 -1.3 37.6 -11.9 40.7Mexico 1,523.0 3,246.0 2,594.0 3,037.0 2,632.0 4,762.0 5,366.0Morocco 0.5 59.6 84.5 167.1 165.1 319.9 423.6Panama -62.2 56.8 -51.7 36.4 -17.6 -40.3 -0.8Peru 22.0 32.0 26.0 59.0 41.0 -7.0 127.0Poland 16.0 12.0 15.0 11.0 89.0 291.0 678.0Syrian Arab Republic 65.0 7.0 121.0 74.0 71.0 62.0 67.0

Severely indebted low-income 1,360.6 1,889.7 1,691 .3 3,477.5 1,764.0 1,254.8 1,655.9

Moderately indebted low-income 512.3 727.9 863.5 1,161 . I 1,502.1 1,906.6 2,225.5

Moderately indebted middle-income 2,001.5 2,315.4 3,595.9 3,490.3 4,210.5 7,650.3 7,787.8

Selected countries' 5,879.6 6,829.0 9,846.7 13,859.9 13.969.0 19,909.1 25,927.2Chile 116.0 230.0 141.0 184.0 249.0 563.0 737.0China 1,875.0 2,314.0 3,194.0 3,393.0 3,487.0 4,366.0 11,156.0Colombia 674.0 3 19.0 203.0 576.0 500.0 457.0 790.0Egypt 1,217.4 947.7 1,190.0 1,250.2 734.0 253.0 459.0Hungary 0.0 0.0 0.0 0.0 0.0 1,462.1 1,479.2India 1 18.0 212.0 91.0 252.0 162.0 141.0 151.0Indonesia 258.0 385.0 576.0 682.0 1,093.0 1,482.0 1,774.0Korea, Rep. of 435.0 601.0 871.0 758.0 715.0 1.1 16.0 550.0Malaysia 488.9 422.7 7 1 9.4 1 ,667.9 2,332.5 4,072.6 4,117.6Nigeria 166.8 602.7 376.9 1,882.3 587.9 712.4 896.6Philippines 127.0 307.0 936.0 563.0 530.0 544.0 228.0Thailand 262.5 351.9 1,105.4 1,775.5 2,443.6 2,014.0 2,115.8Turkey 125.0 115.0 354.0 663.0 684.0 810.0 844.0Venezuela 16.0 21.0 89.0 213.0 451.0 1,916.0 629.0

Note: Table indudes data for DRS reporters only. See table A I I for country cLassilicabons.a. Most of these countries are also included in the indebted country groups.Source: World Bank, Debtor Reporting System.

FEBRUARY 1994 35

STATISTICAL APPENDIX

TABLE A.1OEMERGING STOCK MARKETS

Market capitalizabon Value of stock traded Price-earnings ratio(US$ millions) (US$ millions) (percent)

Economy 1993Q I 1993Q2 1993Q3 1993Q I 1993Q2 1993Q3 1993QI 1993Q2 1993Q3

Argentina 19,102 26,968 31,811 2,835 2,043 2,393 36.8 32.6 39.3Brazil 59,489 76,023 93,205 6,669 10,791 13,345 16.1 16.7 14.1Chile 33,510 34,725 35,530 600 573 713 13.1 15.8 16.9Colombia 6,571 5,280 6,869 81 181 217 23.7 14.6 18Greece 9,929 9,410 10,425 526 331 816 7.4 8 9.3

Hungary 483 498 655 4 8 35 15.3 14.1 17.6India 59,793 59,016 71,811 3,545 3,424 4,977 24.7 25.8 33.1Indonesia 14,385 17,101 20,697 1,799 1,403 2,258 14.7 17.6 21.7Jamaica 3,872 3,118 1,977 158 74 31 18.9 14 11.6Jordan 3,788 5,203 4,909 330 514 370 15.2 18.6 18

Korea, Rep. of 105,929 118,839 114,462 41,989 65,547 30,308 20.6 23.9 20.6Malaysiaa 100,143 118,829 153,540 11,664 33,800 35,764 22.2 25.6 29.7Mexico 132,575 129,983 145,154 9,539 9,361 15,699 12.5 12.4 14.1Nigeria 872 1,199 1,014 5 2 2 9 9.8 6.3Pakistan 7,199 7,078 7,622 219 321 387 18 17.7 18.3

Peru 2,713 3,212 4,169 252 256 493 28.8 22.4 34.9Philippines 16,341 16,611 19,703 1,083 1,061 1,457 17.2 17 21.5Poland 265 849 1,470 44 241 638 3.6 9.9 17.2Portugal 9,988 10,443 12,006 779 1,020 1,273 9.5 13.3 15.9Sri Lanka 1,343 1,555 1,804 25 45 126 10.6 12.9 16.3

Taiwan(China) 148,488 121,973 108,988 103,505 81,212 40,634 24.6 20.5 21.2Thailand 58,910 62,162 70,470 14,729 9,365 15,341 14.8 14.4 15.6Turkey 13,470 22,880 30,282 2,508 4,766 5,850 11.9 17.8 26.2Venezuela 6,229 7,125 6,090 271 598 441 13.9 18.6 13.9Zimbabwe 614 667 988 3 3 16 3.1 3.5 6

Total 816,001 860,747 955,651 203,162 226,940 173,584 ..

Not available.a. Data for Malaysian-incorporated companies only.Source: International Finance Corporation, Emerging Stock Markets Factbook.

36 FINANCIAL FLOWS AND THE DEVELOPING COUNTRIES

STATISTICAL APPENDIX

TABLE A. I ICOUNTRY GROUPS

East Asia and Pacific Former Yugoslavia, Guatemala, Tunisia, Ghana,American Samoa Gibraltar Guyana Yemen, Guinea,Cambodia Greece Haibt Guinea-Bissau,China, Hungary, Honduras, South Asia Kenya,Fiji Isle of Man Jamaica Afghanistan LesothoGuam Maltal Martinique Bangladesh, Madagascar,Indonesia, Poland, Mexico Bhutan Malawi,Kiribati Portugal Nicaragua, India, Mali,Korea, D.P.R. of Romania, Paraguay, Maldives, Mauritania,Korea, Rep. of, Slovak Republic Peru, Nepal Mauritius,Lao P.D.R., Turkey, Puerto Rico Pakistan, MayotteMalaysia, St. Kitts and Nevis, Sri Lanka, Mozambique,Marshall Islands Latin America and St. Lucia NamibiaMicronesia the Caribbean St. Vincent Sub-Saharan Africa Niger,lMongolia Antigua and Barbuda Suriname Angola, NigerialMyanmar Argentina, Trinidad and Tobago, Benin ReunionNew Caledonia Aruba Uruguay, Botswana Rwanda*Papua New Guinea, Belize, Venezuela, Burkina Faso, Sao Tome and Principe*Philippines Bolivia Burundi* SenegalSolomon Islands* Brazil* North Africa and Cameroon* Seychelles*Thailand* ChileS the Middle East Cape Verde, Sierra Leone,Tonga, Colombia AJgeria' Central African Republic* Somalia*Viet Nam Costa Rica, Egypt, Arab Rep, of* Chad, South AfricaWestern Samoa, Cuba Iran, Islamic Rep. of* Comoros* Sudan

Dominica* Iraq Congo, SwazilandEurope and Dominican Republic, Jordan* C6te d'lvoire, TanzaniaCentral Asia Ecuador* Libya Djibouti Togo,Albania* El Salvador* Morocco* Equatorial Guinea* Uganda,Bulgaria* French Guiana Omanr Ethiopia* Zaire'Czech Republic Grenada* Saudi Arabia Gabon* Zambia,Former Soviet Union Guadeloupe Syran Arab Republic Gambia, The* Zimbabwe*

Severely indebted Peru Madagascar Moderately indebted Moderately indebtedmiddle-income countriesa Poland Mali low-income countriesa middle-income countriesaAlbania Synan Arab Republic Mauritania Bangladesh ChileAlgeria Mozambique Comoros ColombiaAngola Severely indebted low- Myanmar Gambia, The Costa RicaArgentina income countries' Nicaragua Guinea Dominican RepublicBolivia Burundi Niger India GabonBrazil Central Afncan Republic Nigeria Indonesia GuatemalaBulgaria Egypt, Arab Rep. of Rwanda Malawi HungaryCameroon Equatorial Guinea Sao Tome and Principe Maldives Papua New GuineaCongo Ethiopia Sierra Leone Nepal PhilippinesC6te d'lvoire Ghana Somalia Pakistan Russian FederationEcuador Guinea-Bissau Sudan Togo SenegalJamaica Guyana Tanzania Yemen TunisiaJordan Honduras Uganda Zimbabwe TurkeyMexico Kenya Zaire UruguayMorocco Lao P.D.R. Zambia VenezuelaPanama Liberia

Offshore banking centersb Panama, Gabon,Bahamas Singapore Iran, Islamic Rep. of,Bahrain Vanuatu IraqBarbados, LibyaBermuda Oil exporters Nigeria,Cayman Islands Algeria, Oman,Hong Kong Angola, QatarLebanon, Bahrain Saudi ArabiaLibera Brunei Trinidad and TobagoMacao Congo, United Arab EmiratesNetherlands Antilles Former Soviet Union, Venezuela,

' DRS reporter. The Debtor Reporting System (DRS), set up in 1 95 1 to monitor statistics on the external debt of developing countries, is maintained by the staff of the Debt andInternatonal Finance Division of the World Bank's Intemational Economics Department. The World Bank is the sole repository for these statistics on a loan-by-loan basis.Note: Country group composition has been modified to reflect the annual updating of GNP per capita and related debt indicators.a. All countries in the group are DRS reporters.b. Offshore banking centers are not included in any other country group except for oil exporters.

FEBRUARY 1994 37

Now available from the World Bank

WorldDebtTablesl993-94 r -- --- - -External Finance for Developing Countries I Yes, please send me the publicationsGives complete information on the debt and external financing I specified belowof developing countries. Contains key data for the countries of |the former Soviet Union and consolidated statistics for all devel- World Debt Tabes 1993-94oping countries, including those that do not report to the World __Volume 1: Analysis and Summary TablesBank's Debtor Reporting System. l 246 pages / Stock #12567 / Price US$16.95

Volume 1: Analyzes recent developments in international fi- Volume 2: County Tablesnance for developing countries and provides summary statisti- 560 pages [not sold separately]cal tables for selected regional and analytical groups compris- Twouvoume seting the 131 Debtor Reporting System countries. I Stock #12569 / US$125.00Volume 2:Complete country statistical tables on the 131 Debtor _ World Debt Tables 1993-94, ExhtReporting System countries, including the countries of the I 48 pages / Stock #12623 / US$6.95former Soviet Union. _ World Debt Tables-Data on DisketteExtracts: A summary of Volumes 1 and 2, in English, French, | Stock #12431 / US$95.00and Spanish. I Portfolio Investment in Develping Counfties

World Debt Tables 1993-94-Data on Diskette 502 pages / Stock #12747 / $25.95Each diskette package includes the complete *STARS* retrieval aymentsoftware and data on a 3 /2" high-density diskette, and requires at Please add $3.50 shipping and handling. For airmail delivery outsideleast 512K memory and MS-DOS version 2.1 or higher. the United States, please add $6.00 per item. For payment in local

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Portfolio Investment in Developing Countries I count ry.

iWVorld Bank Discussion Paper 228 Li Enclosed is my check for US$ . . drawn on a US bank andPresents the proceedings of the World Bank Symposium on Port- payable to the World Bank in US dollarsfolio Investment in Developing Countries, September 1993. In laddressing the dynamic trends in the rapid increase of capital i Enclosed is my check for the equivalent of US$ . . drawnportfolio flows to developing countries, the book I on a local bank and payable to the World Bank in local currency

* Discusseswhethertherapidincreasewillcontributeenough Chargemy:financing to meet long-term needs l Cal

* Rates portfolio investments in emerging markets VISA MasterCard _ American Express* Shows how investors could profit from emerging-market |funds* Describes the main barriers to capital flows into these mar- l Credit Card Account Number Expiration Date

kets l* Analyzes the many benefits portfolio investments bring to l Signaturedeveloping countries, as well as the potential problems nationsmay face from large portfolio inflows* Examines how countries can reduce the negative effects of l N

increased capital inflows by improving their financial systems Title: and removing barriers to portfolio investment. Company:

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38 FINANCIAL FLOWS AND THE DEVELOPING COUNTRIES

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looks at capital markets, emerging stock markets, foreign direct Comnodity Market and the Developing Counbies l

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Commodity Markets and the Developing I ICountries I Charge my:

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primary commodity markets and their likely impact on prices. l -

World Bank trade analysts look at production, consumption, l l

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FEBRUARY 1994 39

FINANCIALFLOWS AND THE

DEVELOPINGCOUNTRIESA WORLD BANK QUARTERLY

Financial Flows and the Devwloping Countries is produced

by the Debt and International Fmance Division of theInternational Economics Department of the WorldBank. For information about the contents, call(202) 473-3813 or fax (202) 477-0966. The opinionsexpressed are those of the authors and should not beattributed in any manner to the World Bank, to itsBoard of Executive Directors, or to the countries theyrepresent. It is published quarterly in February, May,August, and November. The annual subscription rateis $150.00. Send subscription orders to World BankPublications, Box 7247-7956, Philadelphia, PA19170-7956, USA. Send change of address to theWorld Bank c/o Database America Multifill Serviccs,100 Paragon Drive, Montvale, NJ 07645, USA.

© 1994 The International Bank for Reconstruction andDevelopment/The World Bank1818 H Street, NW, Washington, DC 20433, USAAll rights reservedManufactured in the United States of AmericaVol 1. no.2ISSN 1020-0975ISBN 0-8213-2775-5

Sectoral Libmrary.Prnn td nmyecld paper: N 145 (1