LOCAL GOVERNMENT BORROWING - ppiaf

Practical Lessons from Mexico
and US
• Financial crisis at this point limited to debt issued in US and
Europe. Still net upgrading of credits in Latin America, Asia.
• Risk aversion and credit constraints are likely to lead to less cross-border
private market lending, guarantees in sub-national sector
• Uncertain accuracy of credit ratings in new instruments or new
sectors, until have track record of performance
• Market will scrutinize more thoroughly ratings of sub-national
governments in developing world.
• To help open market, credit ratings should be comparable across
classes of debt.
• Pension funds, other buyers need to know sub-national risk relative to
other debt, not just relative to other local governments.