American Consequences - August 2020

and gaunt. If a 90-pound man loses 20 or 30 pounds, he’s on his deathbed. In response to the dark prospects for poor countries, the G-20 – a group of mostly developed economies – agreed to suspend repayments for government-to-government loans to as many as 76 poor countries for the rest of the year. South Africa is in such dire straits that it’s borrowing money from the IMF for the first time since the end of apartheid in 1994. The G-20 was thinking of both the risks of a default – as well as the human suffering in poor countries. According to the Financial Times : The debt postponement was “a plan to tackle the health and economic crises triggered by the coronavirus pandemic and prevent an emerging-markets debt crunch.” The idea is that the G-20 and other government-supported bodies want poor countries to boost their own economies and save lives with the money that they would otherwise be paying them in bond payments. So to help poor countries, governments are pressuring investors in the debt of the world’s small and emerging-market countries to join them in allowing poor countries to push back payments and start to talk about restructuring debt. Restructuring sovereign debt is usually a long

Lying on Their Deathbed With the global economy lurching into depression, many developing economies have been hit the hardest. Those most dependent on trade are seeing demand evaporate... and countries that sell a lot of commodities (oil, in particular) are hurting the most. Poverty, a weak health care infrastructure, and the physical impossibility of social distancing are prime breeding grounds for the spread of the coronavirus – from Nigeria to Brazil to Russia to India. Five of the six countries globally that have the most coronavirus cases are in the emerging world (the U.S. is the exception). The International Monetary Fund (“IMF”) projects that Brazil’s economy will shrink by more than 9% this year. That would be Brazil’s worst recession in history. The Russian currency, the ruble, is down 15% since the start of the year. South Africa is in such dire straits that it’s borrowing money from the IMF for the first time since the end of apartheid in 1994. India’s prime minister has warned that the coronavirus could set back the country’s socioeconomic progress by “decades.” Economic growth in 2020 in emerging markets as a whole is forecast to shrink for the first time in 60 years. And for every big headline emerging market that’s stumbling, there are a dozen small countries – from Zimbabwe to Peru to Cambodia – that are facing even darker prospects. They’re smaller and have fewer resources to fall back on. If a 175-pound man loses 20 or 30 pounds, he looks skinny

American Consequences

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