ABSTRACT
This chapter focuses on the efficient use of commercial finance, including commercial alternatives to general obligation finance and various forms of mezzanine finance which combine features of debt and equity, in the inevitable restructuring of Latin American countries’ obligations and, eventually, in the recapitalizing of their economies. It defines alternative commercial financing modes, shows how they differ in terms of the extent to which they involve risk sharing and managerial control, and illustrates why an efficient financing structure is likely to involve a mix of these modes. The chapter suggests why the alternatives have not played an important role in LDCs’ financing to date, even prior to the onset of their debt crises, in order to identify the political and institutional preconditions for their implementation. It examines the efficient use of commercial finance for countries with a debt overhang, both as part of a debt reduction program and subsequent to such a program.
