Latam DSA - Dec 2022

Our Debt Sustainability Model uses the standard debt dynamic equation to generate forecasts for the Debt/GDP ratio throughout the next 10 years. Specifically, we use the following equation: $$ d{t+1} =d{t}\biggl[(1-\alpha)\biggl(\frac{1+i{dt}}{(1+gt)(1+\pit)}\biggl) +(\alpha)\biggl(\frac{(1+\Delta\epsilont)(1+i{ft})}{(1+gt)(1+\pit)}\biggl)\biggl] + pdt $$ In which: $$d_{t+1}$$ is the ratio Debt/GDP for the t+1 period; $$\alpha$$ is the share of foreign debt in relation to total debt; $$g_t$$ is the real growth of GDP at the period t; $$\pi_t$$ is the variation of the GDP deflator for the period t; $$\Delta\epsilon_t$$ is the devaluation of the exchange rate between the local currency to the US dollar during the period t; $$i_{dt}$$ is the implicit interest rate for the domestic debt, it is calculated as the ratio between the interest paid for the internal debt during the period t and the internal debt in the period t-1; $$i_{ft}$$ is the implicit interest rate for the foreign debt, it is calculated as the ratio between the interest paid for the internal debt during the period t and the internal debt in the period t-1; $$pd_t$$ is the primary deficit of the government during the period t. We account for uncertainty by applying random shocks for each variable. These shocks are constructed...

Our Debt Sustainability Model uses the standard debt dynamic equation to generate forecasts for the Debt/GDP ratio throughout the next 10 years. Specifically, we use the following the equation: $$ d{t+1} =d{t}\biggl[(1-\alpha)\biggl(\frac{1+i{dt}}{(1+gt)(1+\pit)}\biggl) +(\alpha)\biggl(\frac{(1+\Delta\epsilont)(1+i{ft})}{(1+gt)(1+\pit)}\biggl)\biggl] + pdt $$ In which: $$d_{t+1}$$ is the ratio Debt/GDP for the t+1 period; $$\alpha$$ is the share of foreign debt in relation to total debt; $$g_t$$ is the real growth of GDP at the period t; $$\pi_t$$ is the variation of the GDP deflator for the period t; $$\Delta\epsilon_t$$ is the devaluation of the exchange rate between the local currency to the US dollar during the period t; $$i_{dt}$$ is the implicit interest rate for the domestic debt, it is calculated as the ratio between the interest paid for the internal debt during the period t and the internal debt in the period t-1; $$i_{ft}$$ is the implicit interest rate for the foreign debt, it is calculated as the ratio between the interest paid for the internal debt during the period t and the internal debt in the period t-1; $$pd_t$$ is the primary deficit of the government during the period t. We account for uncertainty by applying random shocks for each variable. These shocks are...