One of the salient features of the recent debt crisis in several Latin American countries has been the coexistence of inverse capital flows. In particular, while the proceeds of public external borrowing were flowing in, private capital was flowing out, as domestic investors made massive switches from domestic financial assets into foreign assets.1 Since domestic public debt was generally quite substantial, a large proportion of these domestic assets were government obligations. Thus, while domestic creditors were reducing their exposure to public debt, foreign creditors were increasing theirs.