EM leaders slam ‘utterly irresponsible’ United States

Leaders in emerging market countries wonder whether the world’s confidence in the US’s creditworthiness is misplaced

  • By Emerging Markets Editorial Team
  • 09 Oct 2013
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Policymakers from emerging markets criticized US politicians’ failure to reach a compromise to reopen the government, warning that every day that passes without a solution to the US debt crisis has a negative effect on the world economy.

“I am not sure people who are forcing this are really aware of what they are doing. They are playing with fire in the US economy and the world economy. I think it is utterly irresponsible what is going on here and I am frankly disappointed with the way the political system is working. This is a political problem, not an economic problem,” Felipe Larrain, Chile Finance Minister, told Emerging Markets on the sidelines of the IMF and World Bank annual meeting in the US capital.

Republicans meet today with President Barack Obama at the White House to try to resolve the budget deadlock, but for leaders in emerging markets this is an opportunity to look at the US’s creditworthiness.

“There are fundamental questions we should not ignore,” Sanusi Lamido Sanusi, Nigeria central bank governor, told Emerging Markets. “I would ask the question, is our confidence in the creditworthiness of the US government in fact not misplaced? Given the level of indebtedness of the government, given the size of the deficit, given the seeming unwillingness to increase taxes and given the propensity or the inclination of the Federal Reserve to monetize all of these government deficits by printing money.”

Economist Nouriel Roubini said that another shutdown might occur “six or nine months from now” as “America’s political system is becoming more polarized.”

“The two parties are more divided, and with the gerrymandering of districts [dividing Congressional districts into safe seats] we may have six or seven more years of this mess,” he predicted.

Tim Adams, president and CEO of the Institute of International Finance (IIF) and former US Treasury undersecretary for international affairs, said he was growing more concerned with each passing day of the shutdown. “I’m surprised that the markets haven’t priced in something much more dramatic. In fact, one might argue that it’s going to keep going on until there is some pressure – maybe market pressure – to find a resolution,” he said.

The shutdown, as well as the possibility of a US default if Congress does not agree to raise the debt ceiling before it expires next week, will affect emerging markets as it creates huge uncertainty. Adams says countries relying heavily on imported capital, with big current account deficits and with short-term debt exposure are likely to suffer the most and “be forced to take a set of policy actions that could be very detrimental to growth.”

So far, very few people have even dared to contemplate what would happen if the US were indeed to default on its debt, which is used as a safe haven investment by investors all over the world. “It is like asking me what happens when you go to a black hole. I don’t want to go there,” Ramon Arcena, IIF Latin America chief economist, answered when asked about the impact of a would-be US debt default.

Jose Vinals, financial counsellor and director of the IMF’s monetary and capital markets department, pointed out that markets were already sending “relevant signals” because yields of short maturities on debt had risen.

Mauricio Cardenas, Colombia’s finance minister, said that US politicians usually waited until the last minute but they got things resolved. “Let’s hope that this time it happens again,” he told Emerging Markets.

  • By Emerging Markets Editorial Team
  • 09 Oct 2013

All International Bonds

Rank Lead Manager Amount $bn No of issues Share %
  • Last updated
  • Today
1 JPMorgan 164.80 545 9.83%
2 BofA Securities 139.54 459 8.33%
3 Citi 128.00 437 7.64%
4 Goldman Sachs 99.84 283 5.96%
5 Barclays 92.11 342 5.50%

Bookrunners of All Syndicated Loans EMEA

Rank Lead Manager Amount $bn No of issues Share %
  • Last updated
  • Today
1 Deutsche Bank 9.11 38 6.62%
2 UniCredit 7.52 36 5.46%
3 BofA Securities 7.39 29 5.37%
4 BNP Paribas 7.38 42 5.36%
5 Credit Agricole CIB 6.01 35 4.37%

Bookrunners of all EMEA ECM Issuance

Rank Lead Manager Amount $bn No of issues Share %
  • Last updated
  • Today
1 Credit Suisse 3.10 7 9.18%
2 JPMorgan 3.10 21 9.18%
3 Citi 2.87 19 8.51%
4 Morgan Stanley 2.81 15 8.33%
5 Goldman Sachs 2.43 15 7.19%