Arturo C. Porzecanski

Arturo C. PorzecanskiArturo Porzecanski is Distinguished Economist in Residence and Director of the International Economic Relations Programme at American University, Washington DC. He previously taught at Columbia University, New York University, and Williams College, but is a late arrival to academia, having spent most of his professional career working as an international economist on Wall Street. Prof Porzecanski was chief economist for emerging markets at ABN AMRO the Americas at ING Bank (1994-2000); chief emerging-markets economist at Kidder, Peabody & Co (1992-93); chief economist at Republic National Bank of New York (1989-92); senior economist at JP Morgan Bank (1977-89); research economist at the Centre for Latin American Monetary Studies in Mexico City (1975-76); and visiting economist at the International Monetary Fund (1973). Since 2006, he carries out and publishes research in international finance; provides consulting services to legal and financial firms, as well as to US government agencies and multilateral institutions; and serves as a Dispute Resolution Arbitrator for the US Financial Industry Regulatory Authority. He received his PhD in Economics from the University of Pittsburgh.

Papers Published in World Economics:

Debunking the Relevance of the Debt-to-GDP Ratio

Historical experience does not confirm the simplistic notion that the heavier the burden of the public debt relative to GDP, the greater is the risk that governments will encounter debt-servicing difficulties. In 25 government defaults that occurred during 1998-2017, the pre-default debt-to-GDP ratios ranged from a very low of 27% (Ecuador in 2008) to a very high of 236% (Nicaragua in 2003), with a sample median of 79%. As ratios of government debt rise, some societies manage to deliver more responsible fiscal behaviour. Low debt ratios, on the other hand, often mask dangerous currency or maturity mismatches, as well as contingent liabilities, capable of suddenly impairing banks and governments. The demand for government bonds can behave unpredictably, and governments with low or high debt ratios can suddenly find themselves cut off from needed financing. Official institutions like the IMF, European Commission, and World Bank have done themselves and their member states a great disfavour by obsessing about debt ratios which do not predict fiscal outcomes.

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Should Argentina be Welcomed Back by Investors?

The search for higher yields has prompted bond investors to venture into increasingly risky territory, such as single-B-rated credits – Argentina among them, the country involved in the largest sovereign default in history. In the author’s view, investors should approach investment opportunities in Argentina with extreme caution. The government’s ability to service its financial obligations remains quite limited, and its attitude towards official and private creditors remains one of contempt. The country is ranked uniformly low in various measures of the business climate, competitiveness, transparency, corruption and economic liberty. It is thus classified correctly as a very risky credit by the leading rating agencies.

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