ABSTRACT

Ricardo Ffrench-Davis has provided an eminently sensible interpretation of the debt crisis in Chile. As of June 1988 the Chilean debt had been reduced by more than 4 billion in US The public sector, and most notably the Central Bank and the state-owned Banco del Estado, have also used Chapter 18 to reduce some of their debt. The domestic counterpart of the rescue of foreign liabilities is the creation of internal debt. If, as the Chilean authorities have pointed out, the government expects to pay all its debt in full, then buying some of it at a discount is a good deal. The 1988 Chilean rescheduling proposal included the possibility of implementing a debt buyback scheme where the Central Bank would use its own reserves. To sum up, Chile has been tremendously successful in using the secondary market to reduce its debt in at least one dimension.