May 2003
Calm after the storm
Sovereign debt restructuring has been hotly debated for years. Paradoxically, though, two of the elements most fought over – collective action clauses and exit consents – seem now to have been accepted with equanimity. • Felix Salmon reports
AFTER MANY YEARS of noisy and contentious debate
about mechanisms for restructuring the bonds of troubled
emerging-market sovereign debtors, matters came to a head in
April. Mexico retired the last of its dollar Brady bonds and
issued $2.5 billion in new global bonds with collective
action clauses (CACs). Uruguay announced that it was looking
to issue billions of dollars of new bonds with CACs, as part
of a restructuring effort. And in the US, Treasury secretary
John Snow administered the coup de grâce to the IMF's plans
for an international sovereign bankruptcy court enshrined in
international law.
The reaction to these events was astonishing: nothing happened.
Press conferences weren't called, outraged op-ed columns didn't
run, the beginning of a new era in crisis resolution was not
proclaimed. Admittedly, there was a small war on at the time. Even
so, the equanimity with which this new world order was accepted
stood in stark contrast to...
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