## External Conditions and Debt Sustainability in Latin America

_IMF Working Papers, January 30, 2013_

## Source details

**Canonical URL:** [External Conditions and Debt Sustainability in Latin America](https://www.imf.org/en/publications/wp/issues/2016/12/31/external-conditions-and-debt-sustainability-in-latin-america-40282)

## Other formats

- [Markdown version](/en/publications/wp/issues/2016/12/31/external-conditions-and-debt-sustainability-in-latin-america-40282/index.md)
- [Structured JSON version](/en/publications/wp/issues/2016/12/31/external-conditions-and-debt-sustainability-in-latin-america-40282/index.json)
- [Bundle manifest](/en/publications/wp/issues/2016/12/31/external-conditions-and-debt-sustainability-in-latin-america-40282/bundle-manifest.json)

## Bibliographic details
- Authors: Gustavo Adler, Sebastian Sosa
- Published: January 30, 2013
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781475588835.001

---

### Summary
- Highly favorable external conditions have helped Latin America strengthen its economic fundamentals over the last decade.
- The paper asks whether the region has built enough buffers to guard against a weakening of the external environment.
- The paper develops a simple framework that integrates econometric estimates of the effect of global factors on key domestic variables that determine public and external debt dynamics with the IMF‘s standard debt sustainability framework.
- Results suggest:
  - Some countries in the region are well placed to withstand moderate or even large shocks.
  - Many countries would benefit from having stronger buffers to be in a position to deploy countercyclical policies, especially under tail events.
  - External sustainability does not appear to be a source of concern for most countries.

### Methodology
- Framework components:
  - Econometric estimates of the effect of global factors on key domestic variables that determine public and external debt dynamics.
  - Integration with the IMF‘s standard debt sustainability framework.

### Key findings and takeaways
- Buffer adequacy:
  - Some countries: able to withstand moderate or large shocks.
  - Many countries: need stronger buffers to enable countercyclical policy deployment under tail events.
- External sustainability:
  - Generally not a source of concern for most countries in Latin America, per the paper’s analysis.

### Policy implications
- Strengthen fiscal and external buffers to increase resilience to adverse external shocks.
- Position countries to be able to deploy countercyclical policies when facing tail events.

---

## Content in this bundle

- **Wp1327**
  - [Wp1327 (Markdown version)](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2013/_wp1327.pdf.md){rel="alternate" type="text/markdown"}
  - [Wp1327 (PDF)](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2013/_wp1327.pdf){rel="external" type="application/pdf"}

---

_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/external-conditions-and-debt-sustainability-in-latin-america-40282_