Exotix Limited, a London-based specialty broker in illiquid bonds and loans with a special emphasis on emerging markets, expressed its concern for the Dominican external debt, which it said is “rising rapidly and unsustainably.” Despite this, the firm did state that the public-debt-to-GDP ratio remains a tolerable 45%. At the start of the Mejia administration it was a mere 20%, primarily with multilateral lending organizations.
In its just-published sovereign research report on the country, Exotix gave the Dominican Republic a vote of confidence. “In our view, the incentives clearly favor keeping up the good work,” said the publication. And even though the political and negotiation psychologies work in the opposite direction, the report attested to a belief that “this factor marginally supports continued engagement by foreign bondholders.”
Exotix concludes that the tensions between the government’s economic self-interests and the perceived political interests of various parties will continue. But it believes that pragmatism will prevail. “Policymakers have more to gain by implementing orthodox policies which avert a bond restructuring than by opting for populisms or seeking nominal financial gains through a rescheduling,” reads the report. “As a result, Dominican Eurobonds – with no amortizations until 2005 – remain good value at current levels,” says Exotix, also noting that “? those without confidence in the Mejia administration’s pre-election leadership or who feel a forced bail-in would be an implicit condition of further IMF assistance should stay away.”
To read the full report, see Dominican Republic – October 2003.pdf or refer to
http://www.exotix.co.uk