Till Debt Do Us Part: A Failed Marriage

Ruperto Alonso, Dante Canlas, Raul Fabella, Felipe Medalla, Cayetano Paderanga, Jr.

Abstract


The agreement that the Philippine signed in July 1987 with commercial bank creditors was borne out of a negotiating failure on part of the Philippines. An effective approach to debt negotiations should have had the following elements: (a) a focus on net resource flows; (b) a contingent agreement that links net resource flows to economic conditions; (c) a distinction between old debt and new that gives seniority to new loans; and (d) a new negotiating team unencumbered with baggage from the past.

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