ValueWalk Features Eric LeCompte's Thoughts on IMF Analysis

Eric LeCompte, Executive Director of Jubilee USA, recently spoke with ValueWalk about the policy challenges faced in achieving the sustainable development goals. Read an excerpt below and follow this link to the full article.

As Jamie Dimon Says Lehman Won’t Happen Again, IMF Analysis Points To Next Global Financial Crisis

“Developing countries are wrestling with crisis,” UN sovereign debt analyst and Executive Director of Jubliee USA Eric LeCompte told ValueWalk, pointing to a virus that could quickly spread to the developed world. “There is more than one canary in this coal mine.”

The IMF has released a series of reports on unsustainable debt levels in developing economies that it says makes the global environment “unsettled.”

LeCompte notes that even with a relatively strong global economy, many developing nations are finding trouble with GDP to debt levels above 100% and 17 countries are in default. He was moderating an IMF panel discussion on the topic when unknown derivatives risk exposures tied to the debt was raised as an issue that could derail the economy, calling it “the scariest IMF meeting I’ve ever attended.”

The debt crisis is now engulfing 40% of low-income nations with the IMF concerned of rising debt levels in African nations that is even starting to impact wealthy regions such as Kenya and South Africa.  What also concerns LeCompte is how the debt problem is spreading in Latin America, right on the doorstep of the US. Brazil, El Salvador, Venezuela and Argentina are all showing signs of cracking under a mountain of debt. According to LeCompte,  three Latin American countries are beyond 70% debt to GDP.

Argentina, which lost a debt fight with hedge funds led in part by Paul Singer’s Elliott Management, is particularly hard hit. Investors are now pricing in a 49% chance of default, up from 22% a year ago, according to credit-default swaps pricing.

“In Argentina, public money (from the IMF) is bailing out hedge funds,” LeCompte quipped, noting that solutions for another global debt crisis have not been put in place.

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