Dominican Republic: Sovereign sets template for debt exchanges
Investors welcome a market-friendly deal achieved with the minimum of fuss
| Column in Santo Domingo:
Debt exchange points the way
for Latin sovereigns
Sometimes, a sovereign bond default can cause financial chaos, as in the case of Russia. Sometimes, it can cause widespread hardship, as in the case of Argentina. Sometimes, it can be the prelude to a fundamental change in the way the markets view the international financial architecture, as in the cases of Ecuador and Uruguay. And sometimes, it can come and go barely unnoticed, as in the cases of Pakistan and Ukraine. The triumph of the bond exchange completed in May by the Dominican Republic is that it falls squarely into the last category, although by rights being thought of more in the Ecuador/Uruguay category. For despite the lack of hype or even much in the way of interest from the market as a whole, the Dominican Republic is blazing a new trail when it comes to the crucial question of when, why and how a country can and should default on its sovereign bonds.
The mechanics of the deal were very similar to Uruguay's: the Dominican Republic took its bonds and stretched out their maturities by five years, while maintaining their coupons.