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World Bank Document coz Public Disclosure Authorized oo z L,- QcDN l | C< Public Disclosure Authorized a') z a~~~~~~~~~~~~>Ca) r n -4- s~~~~~~~ Public Disclosure Authorized Public Disclosure Authorized CONTEN'TS AND SUMMARY INTERNATIONALLENDING currency debt of four major Chinese banks AND CAPITALMARKETS on review for downgrading. * DEVELOPING-COUNTRY BORROWING PAGE 4 EQUITY PORTFOLIO AND Developing countries raised $20.1 billion in FOREIGN DIRECTINVESTMENT bonds and loans in the fourth quarter of 1994, up slightly over the third quarter. Bond * EMERGINGSTOCK MARKETS PAGE 11 issuance was much higher, but loan volume The IFC's dollar-based composite index was fell. The Mexican peso devaluation and the down 13% in the first quarter, in the wake of weak US dollar threw the markets into tur- the Mexican peso devaluation and the col- moil and caused Latin American bond is- lapse of Barings bank. Latin American mar- suance virtually to dry up. Nevertheless, the kets fell by 28% and Asian by 8%. first quarter saw a number of Korean corpo- Nevertheless, prices recovered strongly to- rate bond issues and a $1 billion project fi- ward the end of the quarter. nancing for a Malaysian toll road. * NEW EQUITIESAND * GLOBALBORROWING PAGE 7 DERIVATIVES PAGE 13 According to the OECD, $274 billion was At $23.3 billion, US investors' net purchases raised in international capital markets in the of international equities in 1994 were only a fourth quarter, bringing the year's total to third of the 1993 figure. Net equity purchases $954 billion, a 17% increase over 1993. New declined sharply throughout 1994 and were syndicated lending remained strong in the -$9 billion in the fourth quarter. fourth quarter at $56 billion. For the year as a whole, spreads fell sharply for OECD * FOREIGNDIRECT INVESTMENT country borrowers but rose slightly for AND PRIVATIZATION PAGE 15 developing-country borrowers to 107 bp FDI flows into developing countries in 1994 over LIBOR. are estimated at a record $80 billion, up 13% over 1993. Privatizations were off to a slow * COMMERCIALBANK CLAIMS PAGE8 start in 1995. Argentina sold a stake in the In the third quarter, net international bank Santiago del Estero power utility, Mexico credit increased by $70 billion, while cross- announced plans to sell some 40 petrochem- border claims of BIS reporting banks were ical plants, and Peru's aggressive program is $119 billion higher thanks to growth in yen- expected to resume following elections. denominated interbank business. Claims on Poland made a public offering of bank shares. developing countries fell in all regions except Asia, while developing-country deposits in- creased by a record $29 billion. SECONDARY MARKETS FOR DEVELOPING- * MARKETCREDITWORTHINESS PAGE 10 COUNTRYDEBT PAGE 16 Ratings for Mexico's local currency debt were lowered to BBB+, while Argentina's In the first quarter, Mexican, Argentinian, long-term foreign currency debt was revised and Brazilian eurobonds fell to new lows. down to a stable outlook, although the BB Overall, Latin American bond prices fell 11% rating was confirmed. Malaysia's foreign cur- in the quarter but ended with a strong re- rency debt rating was raised from A2 to Al. covery. Country debt that shrugged off the Tunisia received a first-time rating at invest- spillover effect included that of Eastern ment grade. Moody's placed the foreign European countries, Russia, and Morocco. 2 FINANCIALFLOWS AND THE DEVELOPINGCOUNTRIES CONTENTS AND SUMMARY OFFICIAL FLOWS: tinued to slide. The quality of loan portfolios MULTILATERAL AND BILATERAL continued to improve, with nonperforming assets standing at 0.93% of the total. UK 7 * MULTILATERALFLOWS PAGE 1 7 banks reported higher profitability in 1994. , In April 1995 the IMF approved an extension _ _ _ _ __ _ _ of Argentina's extended Fund facility to a fourth year and increased the amount by FINANCIAL BRIEF: about $2.4 billion. The IMF also approved a COMPOSITION OF CAPITAL / 12-month stand-by credit for Russia of up to INFLOWS MATTERS FOR $6.8 billion and credits for the Ukraine of SUSTAINABILITY PAGE 20 about $2 billion. Mexico's recent experience suggests that * BILATERAL ODAAND investors will more carefully scrutinize the EXPORT CREDITS PAGE 18 makeup of external capital inflows. The bal- A new organization formed by the merger of ance of portfolio equity, short-term debt, the EXIM Bank of Japan and the Overseas foreign direct investment, and official flows Economic Cooperation Fund will oversee all matters for sustainability. of Japan's activities related to Official Devel- opment Assistance and untied loans. In the flterqaSectora,t. first quarter, EXIMJapan extended two un- STATISTICAL APPENDIX 4dH 1'°tk tied loans of about $178 million to Peru. Pmeftj onn * BANK AND TRADE-RELATED J/t/N NONBANK CLAIMS PAGE 23 ° 2 1995 DEBT RELIEF UPDATE .COMMERCIALBANKCLAIMS * OFFICIAL CREDITORS PAGE 1 9 ON DEVELOPING COUNTRIES PAGE 24 In early 1995 the Paris Club concluded agree- * COMMERCIAL BANK CLAIMS ments on the Naples terms, granting relief of ON DEVELOPING COUNTRIES, debt or debt service for Bolivia, Guinea, BY COUNTRY OF ORIGIN PAGE 25 Guinea-Bissau, Nicaragua, Senegal, Togo, and Uganda. * MATURITIES OF BANK CLAIMS ON DEVELOPING COUNTRIES PAGE 29 * COMMERCIAL CREDITORS PAGE 19 * FUNDS RAISED ON In February 1995 Ecuador closed its commer- INTERNATIONAL CAPITAL MARKETS PAGE 30 cial bank debt reduction agreement, which re- structured $7.8 billion of debt, including $3.3 * SECONDARY MARKET DEBT billion of past due interest. Panama's negotia- (BID) PRICES PAGE 31 tions continue to advance. Russia agreed to pay * EMERGING STOCK MARKETS PAGE 32 its commercial banks $500 million of overdue interest that accrued in 1994. * FDI FLOWS PAGE 33 * COUNTRY GROUPS PAGE 34 COMMERCIAL BANK PROVISIONING AND CAPITAL ADEQUACY PAGE 20 Tables on external debt and aggregatelong-term US banks reported lower earmings for the resource flows are published only as data are fourth quarter of 1994, as trading profits con- updated, usually once a year in February. MAY 1995 3 INTERNATIONAL LENDING AND CAPITAL MARKETS DEVELOPING-COUNTRY TABLE 2 BORROWING BOND ISSUES BY TYPE OF BORROWER U DEVELOPINGCOUNTRIES RAISE $20.1 U5$millions * ~~~~~~~~~~~~~~~~~~1994 1995 BILLION IN FOURTH QUARTER 1993 1994 Q4 QI According to the OECD, developing coun- Airdeveloping countries 55,20150,129 13,316 5,565 tries raised $20.1 billion on international Private 18,30421,010 5,882 2,125 Sub-SaharanAfrica 0 75 75 0 bond and loan markets in the fourth quarter EastAsia and Pacific 4,547 8,604 1,966 1,617 of 1994, up slightly from the previous quarter SouthAsia 556 636 0 0 Europeand Central Asia 354 1,598 406 471 but below the record $25.5 billion of the LatinAmerncaandCarbbean13,845 10,097 3,435 37 fourth quarter of 1993 (table A.5). Bond vol- Middle Eastand North Africa 0 0 0 0 ume was much higher than in the preceding Sovereign 19,904 17,156 5,176 1,447 Sub-SaharanAfrica 0 1,520 750 0 quarter, but loan volume declined (table 1). EastAsia and Pacific 907 2,399 0 0 For developing countries overall, bonds ac- SouthAsia 0 150 150 0 Europeand Central Asia IS,I15 9,1IS 2,733 973 counted for 72% of funds raised through Lat n America and Caribbean 3,882 3,572 1,543 223 debt. East Asia and Latin America had sharply MiddleEast and NorthAfrica 0 400 0 251 different patterns, however. East Asian bor- Otherpublic 15,994 11,963 2,258 1,992 Sub-SaharanAfrica 0 0 0 0 rowers raised $6.8 billion, nearly 40% less EastAsiaand Pacific 8,106 6,5990 555 1,273 than in the preceding quarter; for Latin SouthAsia 0 300 0 0 Europeand Central Asia 928 I ,062 97 582 America, at $7.2 billion, the fourth-quarter LatinAmerica and Caribbean 6,910 4,003 607 137 figure was more than double that in the third, MiddleEast and North Africa 0 0 0 0 before the Mexican peso devaluation. Source:Euromoney Bondware and Worid Bank. U INVESTORSSEESAW ON THE MEXICAN ation, associated capital outflows, and the DEVALUATIONS AND UNCERTAINTY ABOUT continuing weakness of the US dollar. Con- THE US DOLLAR cerns over the ability of Mexico and Ar- In the first quarter, financial markets were in gentina to finance their current account turmoil because of the Mexican peso devalu- deficits and maintain the stability of their banking systems were allayed by the conclu- TABLEI sion of official financing support packages. INTERNATIONAL BORROWING BY SELECTED DEVELOPING Evidence of financial market overshooting COUNTRIES appeared in the last two weeks of the quarter, US$millions 1992 1993 1994Q3 1994Q4 when investor sentiment turned and Latin Total Bonds Total Bonds Totol Bonds Total Bonds American securities experienced strong price Argentina 1,529.2 1,529.2 6,473.2 6,097.2 819.4 819.4 2,572.3 1,937.8 appreciation. At the same time the US dollar Brazil 3,010.0 2,830.0 6,449.4 6,120.4 424.6 424.6 2,128.1 2,128.1 weakened and continued to fall, notably Chile 350.0 0 774.6 432.6 0 0 0 0 China 4,043.2 1,273.2 6,756.0 2,956.8 2,603.0 878.8 1,378.2 665.6 against the yen. Investors and foreign ex- Czech Republic' 39.5 I 5.5 902.6 702.6 62.9 0 325.0 150.0 change speculators appeared to expect either Hungary 1,446.1 1,234.8 5,070.7 4,808.5 966.7 666.7 1,099.4 804.4 India 200.6 0 475.0 445.0 594.4 289.4 168.0 0 large-scale official intervention or a substan- Indonesia 2,641.2 611.0 3,726.0 1,725.9 2,182.5 660.0 1,126.0 250.0 tialpolicyrealignmentwithin G-7economies, Korea 5,204.0 3,181.6 7,718.8 5,646.2 2,855.7 1,404.7 1,413.2 1,120.3 Malaysia 1,270.6 0 1,611.1 0 903.1 750.0 400.0 400.0 but they were disappointed on both counts.
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