Abstract

Since the Asian crises of the late 1990s, researchers and policymakers have put more emphasis on countries’ balance sheets to identify sources of vulnerability. This has led several authors to advocate a “holistic” balance sheet approach as a complement to other surveillance practices to closely monitor these vulnerabilities and sectoral interlinkages.2 A fragile balance sheet of a single sector of the economy might be enough to plunge a country into crisis due to the exposure of other sectors to that single sector. In Central America, assessing the vulnerabilities of the sovereign is of particular importance since the sovereign is the most important external debtor, with implications for the economy as a whole.3 This chapter analyzes Central America’s sovereign debt structures, considers how they evolved over time, and assesses the vulnerabilities implied by them.4

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