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Ms. Irena Asmundson

Latin America: An End to Boom and Bust? covers prospects in that region, which has managed to sustain a decade of prosperity after a history of boom and bust cycles. In our cover story, Nicolás Eyzaguirre, Director of the IMF's Western Hemisphere Department, says Latin America has the potential to become an increasingly important global player. But boosting productivity and competitiveness remain key policy challenges and the fruits of success must be more broadly shared. Other articles on our cover theme look at the prospects for Brazil, inequality in Latin America, and how to raise productivity. Turning from Latin America, we interview former IMF Managing Director Michel Camdessus, former IMF MD and now head of a group of luminaries tasked with generating ideas on how to make the global monetary system more stable in the wake of the world financial crisis. This issue of F&D also features articles on financial market cycles, public investment in infrastructure, whether to worry about inflation or deflation, democracy and liberalization, how to manage health care spending, and rising food prices. People in Economics profiles growth guru Robert Solow, winner of the 1987 Nobel Prize in economics. Our regular Back to Basics feature explains financial services. Data Spotlight looks at how access to financial services is growing in developing countries; and Picture This highlights the IMF's new database of public debt since 1880.

Mr. Jian-Ye Wang, Mr. Yo Kikuchi, Mr. Sidhartha Choudhury, and Mr. Mario Mansilla

Abstract

Official export credit agencies (ECAs), a key pillar of the international financial architecture in the second half of the twentieth century, financed a significant share of exports from industrialized countries and provided larger debt financing for developing countries than either multilateral or bilateral creditors. Since the early 1990s, however, the world has changed dramatically. As noted in a conference in 2000 on the role of the U.S. Export-Import Bank in the twenty-first century, private credit insurance companies have “increasingly occupied the market” while “government-insured export business tends to account for a shrinking share of total exports in the major exporting countries.”1 Indeed, globalization, fueled by privatization and trade and capital liberalization, has significantly altered the landscape of international trade finance in recent years.2 Yet there are more ECAs than ever before, as developing countries launch agencies of their own.

Mr. Jian-Ye Wang, Mr. Yo Kikuchi, Mr. Sidhartha Choudhury, and Mr. Mario Mansilla

Abstract

Official export credit agencies were established originally to promote national exports in situations where the private sector was reluctant to do so due to high political and commercial risks. Because their support for exporters also gives importers access to finance (through buyer or supplier credit), and because most agencies also provide insurance for outward direct investment, these institutions have played a significant role in financing for developing countries. However, official export credit agencies are not a homogenous group. Their key mandates and the institutional arrangements for providing official export credit support are summarized in Boxes 2.1 and 2.2. The first box also presents background information on the trade finance market, including key trade finance providers besides official export credit agencies.

Mr. Jian-Ye Wang, Mr. Yo Kikuchi, Mr. Sidhartha Choudhury, and Mr. Mario Mansilla

Abstract

The decisions of the OECD governments to further reduce subsidies and to downsize government-supported businesses in the early 1990s were key factors in setting in motion the retreat of official agencies as suppliers of short-term export credits in industrial countries. Both national and international policies have also had a direct impact on the level, destination, and sectoral allocation of officially supported export credits. The subsequent rise of the private sector represents a fundamental force reshaping the landscape of international trade finance, with long-term implications for official agencies.

Mr. Jian-Ye Wang, Mr. Yo Kikuchi, Mr. Sidhartha Choudhury, and Mr. Mario Mansilla

Abstract

The evidence and analysis in the preceding chapters indicate that, while the promotion of national exports remains the principal role of official export credit agencies, the focus of these agencies has been changing, with notable differences between industrial and developing countries. Official ECAs in industrial countries continue to fill in the trade finance gaps in markets where private sector financing is unavailable or insufficient; but in recent years, a significant share of ECA support has gone to keep national exporters competitive in global markets by countering foreign government support provided to competitors. This is particularly the case in sectors with economies of scale and noncompetitive market structure, such as aircraft and military equipment.

Mr. Jian-Ye Wang, Mr. Yo Kikuchi, Mr. Sidhartha Choudhury, and Mr. Mario Mansilla

Abstract

Over the past decade, the private sector has grown to become capable of providing trade financing adequately and competitively in certain markets previously dominated by official export credit agencies. Official ECAs also have to deal with two other sources of competition originating from economic development in recipient countries: the expansion of domestic banking capacity, and improved access of borrowing countries to other sources of international financing as their income level and creditworthiness rise. The current top markets of ECAs may eventually become self-sufficient in meeting the financing needs for their capital goods imports and even in large project financing. (For instance, such was the case in Spain in the 1960s, Korea in the 1980s, and Mexico and possibly China more recently.) If these factors continue to develop, official ECAs’ share in world trade may decline further. Especially in OECD countries, official ECAs are facing the challenge of private sector competition and an associated adverse selection problem—how to break even while covering the riskiest segments of the market.

Mr. David S. Hoelscher, Mr. Michael W Taylor, and Mr. Ulrich H Klueh

Abstract

This paper describes recently established deposit insurance systems, identifying emerging trends. In line with previous IMF work on the subject, it argues against the development of "best practices" applicable to all systems. Rather, it stresses the importance of incorporating each country’s individual objectives in adopting a deposit insurance system, as well as that country’s characteristics, to ensure an effective system that minimizes disincentives and distortions to financial sector intermediation. The paper includes a summary of the academic literature.

International Monetary Fund. Asia and Pacific Dept
This assessment is a review of the financial environment of Malaysia. Like many other Asian countries, Malaysia experienced financial distress in the late 1990s, but the country’s policy reforms have moved it to a successful economy. A ten-year financial plan (2001–10) by Bank Negara Malaysia restructured the financial sector. Banks were well capitalized, household debts were strengthened, and securities and insurances were developed. Malaysia thus became the global center for Islamic finance. The authorities look on to a developed Malaysia by 2020.
International Monetary Fund. Monetary and Capital Markets Department
This paper provides an update on the German insurance sector and an analysis of certain key aspects of the regulatory and supervisory regime. It includes an analysis of German practice in relation to selected Insurance Core Principles in the context of a wider discussion of key issues in regulation and supervision. This technical note focuses mainly on recent developments in the sector and key vulnerabilities, including life insurance issues, those vulnerabilities associated with the continuing low interest rate environment; the preparations of the authorities and industry for the implementation of the Solvency II requirements; and the supervisory approach to large insurance groups.
International Monetary Fund
The Kingdom of Bahrain’s Financial System Stability Assessment highlights banking supervision, insurance supervision, securities regulation, and antimoney laundering and combating the financing of terrorism. The banking sector is well capitalized. Asset quality has been improving and provisioning is high. Profitability surged in 2004–05, but historically, return on equity has been moderate for many institutions. Favorable liquidity conditions have caused regional equity and real estate markets to surge. Consumer lending has grown rapidly, although it slowed in 2005 following a tightening of loan to income limits.