Flood of Dollar Debt Could Come Back to Haunt Emerging Economies

Emerging-market companies are binging on U.S. dollar debt and that could become a source of trouble in some parts of the world if growth slows, interest rates rise or the dollar resumes its ascent.

.. U.S. dollar debt stood at $3.6 trillion in emerging markets through the third quarter of 2016, an all-time high

.. a bout of investor risk aversion could expose $135 billion worth of corporate credit to repayment problems.

.. If the dollar appreciates faster than expected, some corporate borrowers, especially those who derive their revenues largely in local currencies, could find themselves in a currency mismatch and be forced to ask the central bank for help—which not all central banks are positioned to do.

.. Countries such as India and the Philippines, which have relatively low stocks of external debt and healthy foreign-exchange reserves, are in better shape, analysts say. Economies such as Malaysia and South Africa, which have small currency reserves and high levels of dollar-denominated debt, are at particular risk. Venezuela and Turkey look especially vulnerable.

.. Venezuela’s state-run oil company PdVSA was late on its coupon payments worth $404 million in November, in an apparent struggle against low oil prices and falling foreign-exchange reserves.

.. “There are potential vulnerabilities looking further ahead, particularly if the Fed were to raise rates much more aggressively than what the market has priced at the moment,”

2014 Commencement address by Bill and Melinda Gates

Ten years ago, I traveled to India with friends. On the last day there, I spent some time meeting with prostitutes. I expected to talk to them about the risk of AIDS, but they wanted to talk about stigma. Most of these women had been abandoned by their husbands, and that’s why they’d gone into prostitution. They were trying to make enough money to feed their kids. They were so low in the eyes of society that they could be raped and robbed and beaten by anybody – even by police – and nobody cared.

.. Talking to them about their lives was so moving to me. But what I remember most is how much they wanted to touch me and be touched. It was as if physical contact somehow proved their worth. As I was leaving, we took a photo of all of us with our arms linked together.

.. The stigma of AIDS is vicious – especially for women – and the punishment is abandonment.

.. The community they formed became a platform for everything. They were able to set up speed-dial networks to respond to violent attacks. Police and others who raped and robbed them couldn’t get away with it anymore. The women set up systems to encourage savings. They used financial services that helped some of them start businesses and get out of sex work. This was all done by people society considered the lowliest of the low.

.. The pessimists are wrong in my view, but they’re not crazy. If technology is purely market-driven and we don’t focus innovation on the big inequities, then we could have amazing inventions that leave the world even more divided.