The problem of collective action

In most cases, the IMF can help countries overcome balance of payments problems that arise without the pressure on creditors to act against their will. The financial agreement for a moderate and a convincing program of economic adjustment and reform often enough so that private lenders and investors regain confidence, and thus able to restore the country’s access to private capital abroad. The program recently agreed with Mexico, Bulgaria and the Baltic countries are a good example of this “catalyst”. In these cases the private sector contributes to the solution of the crisis on a voluntary basis, simply defending their own interests.

But what if the country needs in the short term a significant amount of foreign currency (which goes beyond what the IMF and other official lenders are willing to provide) and are unlikely to get quickly through the private sector ? In that case may need to ask the creditors to limit their demands for repayment. Knowing when to do so is not easy. For example, in the cases of Brazil and Korea, the economic policy programs supported by the IMF initially failed to restore the confidence of creditors. The banks that had granted loans did not feel safe and continued asking the repayment of their loans. The central banks of industrial countries and the authorities later persuaded them to moderate their demands and renewed loans.

The creditors will also limit the demands of repayment if the country faces a debt burden truly unsustainable, ie an insolvency crisis rather than a lack of liquidity in the short term. In these cases will ultimately inevitable restructuring of the debt of a country.

As in situations of failure of one entity, creditors tend to judge that they should collectively contribute to solving the financial crisis to exercise restraint in their demands for payment. The reason for that might be involved, the official sector to encourage or require such restraint is in-you want to avoid the “problem of collective action”, namely that for each creditor separately provides the incentive to charge as soon as possible or to try to block a plan to restructure the debt, and thus take advantage at the expense of other creditors. Some private institutions, to which is known as “vultures” – they specialize in precisely this tactic of blocking. The problem of collective action could worsen because, individually, it is likely that creditors have very imperfect information about the real intentions and other creditors who are in the same situation.

The problem of collective action is clearly manifested in the 1998 film entitled Waking Ned Devine, as Steven Schwarcz, Faculty of Law, Duke University. In the story, a man without heirs named Ned wins ? 6.7 million in the Irish national lottery and died because of the emotion received. Its 52 neighbors in the village where he lived decide which one of them was run by Ned, copper and share the prize with all the ? 130,000 that would apply to each. For the money, all you have to do is say to the administration of the fake lottery winner is Ned. Unfortunately, a woman of the people want greater involvement and threatens to uncover fraud if you do not give you more money.

Another dimension of the problem of collective action is the incentive that is submitted to creditors to act as “stowaways”. An agreement for the restructuring will improve a country’s ability to service that part of the debt whose original conditions remain unchanged. Consequently, there is an incentive for creditors to refrain from participating in the agreement and simply take advantage of the best prospects for repayment.

So, in practice, what is done to limit the actions of creditors that they are free or to persuade them to act with restraint? The approach has varied depending on the case and was caused by several factors. A crucial aspect is the type of debt and creditor.

Bank debt

In cases where the debt is bank loans, the method of creditors to provide a concerted often facilitated by the fact that it is a rather small number of creditors. For example, in early 1999 was relatively easy to get the banks to agree to maintain open lines of credit to borrowers in Brazil, after the announcement of a program negotiated with the IMF initially fail to halt the outflow of capital. The lenders were interested in cooperating in order not to jeopardize trade relations with long-established Brazil. But those circumstances may not occur in other countries.

In late 1997 it took a much tougher approach in the case of Korea. The country’s official reserves were almost exhausted after being used to pay loans from Korean banks abroad. Planning the threat of imminent default. The authorities of the major industrial countries that make up the Group of Ten pressured banks in their countries to renew the debt against the Korean banks, instead of demanding its cancellation. The maneuver worked, but the Group of Ten was willing to employ this method only because of the potential impact of a Korean default on the stability of the global financial system. It is doubtful that the initiative was repeated in the case of a country less important for the system. It could also be dangerous to use this method regularly, as banks were forced to keep open lines of credit in a country could decide to rebalance their loan portfolios and request the cancellation of debts in other countries. The only fear of being subjected to such pressure could be enough to encourage them to request cancellation.

Sovereign bonds

The most visible trend of international capital flows in recent years, apart from the rapid pace of growth has been the advance of the issuance of bonds versus bank loans. Since 1980, the gross issuance of bonds by emerging market countries has grown as a source in an average of 25% annually, four times the rate recorded by syndicated bank loans. This means that private creditors have become increasingly numerous, anonymous and difficult to coordinate. It is also less likely to maintain commercial relations with the countries they lend. However, that said, recent experience with regard to the restructuring of its debt by issuing bonds has been less difficult than many expected.

Following the Russian moratorium in 1998 and although it had reached agreement on an economic program with IMF, Ukraine was unable to raise funds from private investors while the repayment profile of its debt was highly concentrated. Several of the payments falling due in 1998 and 1999 were rescheduled slowly before he could reach an agreement in early 2000 for the restructuring of government bonds. Three of the emissions that are not restructured widely dispersed, so it was relatively easy to reach a collaborative dialogue with the owners. One of the investors the possibility of litigation to demand the full repayment, but others felt that the offer of exchange of securities was attractive enough to be accepted. So the swap was completed successfully and there was no dispute.

Pakistan also reached an agreement for the restructuring of its foreign debt in early 2000. Previously, in late 1998, there was an acute liquidity crisis when the increase in short-term debt coincided with the collapse of the flow of foreign officials because of the nuclear tests that began the country. The restructured debt include deposits held in financial institutions Pakistanis, bonds issued by national authorities and bank lending to government and public corporations. Pakistani bonds were largely held by financial institutions and individuals in the Middle East. The authorities were able to contact the owners of 40% of the debt and negotiated an acceptable offer of redemption.

In the case of Ukraine as for Pakistan, the prognosis for restructuring the bond debt would be frustrated by disruptive litigation was too pessimistic. This might be due to several factors: extensive informal contact between creditors and debtors; credible threat of failure if no agreement was reached; clear understanding that the countries facing serious balance of payments problems and foreign exchange shortages, and assurances that IMF was insisting on significant economic reforms. Marginally, can that many clauses in the contracts signed for the bond issue, which limited the extent that dissenting creditors might prevent an agreement, have helped to avoid litigation. Ukraine is used in such clauses, but not in Pakistan.

When Ecuador experienced difficulties in 1999, the prospects for restructuring seemed much less promising. In September of that year, Ecuador was the first country that failed to pay Brady bonds, some titles created to restructure the bank loans to non-payment of the eighties. Attempts to normalize relations with creditors Ecuador were largely hampered by the confusion of political events. But in May 2000, the Ecuadorian authorities announced they were willing to restructure the whole of the U.S. $ 6650 million of international bonds and Brady, and stressed that no agreements with separate groups of creditors.

The exchange offer for new bonds to 30 and 12 years was launched on July 27, requiring a 85% acceptance for its entry into force. The announcement led to a rise in the price of Ecuadorean debt on the secondary market, indicating that the market believed that the offer was relatively good. In the end, 98% of bond holders accepted the offer. In this case, litigation can be avoided partly due to innovative use of the so-called “exit consent”. This allows, by simple majority of the holders of the bonds, modifying the terms of the original bond not directly related to the refund. It is therefore less attractive for creditors to keep dissidents titles.

This does not necessarily mean that the threat of disruptive litigation is no longer a problem. Peru has recently had to pay a company to “vulture”, Elliott Associates, because the company had achieved in June 2000 a Brussels court issued an order that would have meant that Peru fails to pay interest on the Brady bonds, leading to company to a costly bankruptcy. The legal basis on which Elliott Associates defended his controversial case, but the success forced Peru to pay might encourage other holders of bonds to withstand future restructuring.

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The private financial capital flows across national borders have been heavily promoted long global economic growth. The ability to move capital from one country to another that allows borrowers to finance investments without having to rely on a low national savings sometimes. At the same time, it provides investors and lenders to obtain a higher return than could be achieved in countries of origin. From a global, cross-border capital movements promote efficiency and economic growth, enabling the financial resources used in the more profitable and productive as possible.

Cross-border flows of capital and flourished in the decades preceding the First World War. Investors in London and Paris financed everything from railroads in the Americas and guano from Peru to Australia. Capital flows were restored at the conclusion of that conflict, only to be cut again in the thirties by the great economic depression, the resulting intensification of restrictions on trade and capital flows, and finally the outbreak of the War world.

When plans began for the creation of the IMF and World Bank during the war years, the architects of the new institutions were concerned that the international market for private equity has vanished forever. However, transboundary flows to industrialized countries were restored in the fifties and sixties, and then continues to grow exponentially, and extend to what are now called emerging market economies. In early and mid-eighties, capital flows to emerging market economies experienced a long period of decline due to several of the major borrowing countries, especially in Latin America experienced difficulties in servicing their debt.

Following the crisis, Latin America, “a lost decade” of economic growth and the crisis also threatened with the collapse of commercial banks in industrial countries, especially United States. The international community is thoroughly applied to solving the debt crisis. The effort paid off, and at the end of that decade, the rapid re-acceleration of flows of capital. At 1997, the gross volume of capital flows to emerging economies reached a peak of U.S. $ 290.000 million.

As the growing volume of international capital flows in relation to the size of national economies, also increased the risk of disruption that a change of sign meant. The need to maintain investor confidence may provide a useful discipline, it increases the reward if the measures are good and punishment if they are bad. But in recent years, flows have become more volatile colleagues or what might reasonably justified based on changes in economic prospects of countries.

Thus, economies are increasingly vulnerable to crises of confidence, which is similar to the banking panic situations. Sometimes investors behave in an exaggerated view of the development of the economy, or too late to react. The impact of decisions grows disproportionately as the nervousness of investors are contagious to others. In the book Extraordinary Popular delusions and the Madness of Crowds [popular imagination and madness of the people], Charles MacKay wrote: “Men, well said, think in herds; that was crazy as if they were cattle, while the right direction slowly recovered, and one by one. ”

Could see with regret as the economies of Southeast Asia in 1997 and 1998, the sudden change of sign of a huge volume of capital inflows and foreign currency shortages that entails, can cause major economic damage. Can lead to sharp fall in the value of the currency of one country in the currency markets, which in turn leads to prices of imports and debt service, expressed in foreign currency. At the same time, you may require a considerable improvement on the current account balance for the foreign exchange needed to finance the capital outflow.

In turn, this requires the sharp contraction of economic activity to reduce the cost of imports, which helps the momentum gradually with the fall of the exchange rate occurs in the country’s competitiveness. In Thailand, for example, the position of the current account balance moved from deficit to surplus, of $ 29,000 million or 20% of annual national product between 1996 and 1998. This development was related to falls of 45% in the value of Thai baht in 1997 and 10% in national income in 1998.

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Corporate accounting practices have made great progress through technology. The same has happened with spreadsheets, these tools of financial analysis and monitoring with you wholeheartedly in the modern era.

Whether your company uses spreadsheets to track expenses, cash flow and inventory, provisions for tax and capital or to discuss the purchase and leasing options, the latest features offered in Microsoft Office Excel can save you time. And as you know any person who performs accounting tasks in a small business, time is money.

Share and compare
In many situations, the financial information included in the spreadsheet is used by people from very different profile. The sales representative shows his expense report to the head of sales. The sales manager who forwards it to the accounting, in turn, submits it to the owner of the company. Excel offers several features that improve the opportunities for sharing and comparing books: Smart Documents extend the functionality of a book to respond dynamically to the context of user actions.

The forms and templates are used particularly well as smart documents. The same is true of books that are part of a process. Suppose that your company follows a process to enter the annual costs of employees based on an Excel template. If you convert that template into a smart document, you can connect to a database that automatically enters some of the necessary data. When done, you can click a button and the document is routed to the person in charge of the next step in the process. Such documents saves time. For example, who is responsible for billing you can copy text reusable when preparing monthly statements.

They can also interact with other Office applications. You can use it to send emails with Outlook without leaving the book in which you are and without starting Outlook.

Shortcuts
Below are other quick tips that can help: AutoFilter. Suppose you have 2 thousand customers in a book and need to identify those who have purchased a product. Filtering lets you see only the data you want, the rest are hidden. Unlike the role of management, the filtering does not change or reorganize the data. When you remove the filter, all data appear before applying. Consolidating data from various origins in a book can be a nightmare at times of payment of taxes, end of fiscal accounting and other milestones. You can take a long time to rewrite or copy and paste a large number of columns of data from different sources. The Excel import feature simplifies the task.

Locating discrepancies in long lists can be a very laborious process to examine whether there is line by line. But with Excel you can identify inconsistencies automatically. With some advanced configuration options (for example, choose or create a list in each field that is unique and comparable) that Excel can locate only data contained in a list. Custom templates can help you quickly complete routine tasks. Instead of creating or purchasing forms to track financial data, download free templates for Excel pregeneradas customize according to your specific needs. You can access these templates from Office Online website.

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In recent years, one of the most notable manifestations of globalization has been the rapid growth of international private capital flows, ie loans and investments from one country to another. These flows have produced great economic benefits, but have also exposed countries to periodic crises of confidence when the capital inflows have become suddenly exits.

These crises can impose a considerable economic and social cost. Thus, international financial institutions and member governments, which face a double challenge: preventing the crisis as far as possible and contribute to their solution when you need it. The “constructive engagement” of borrowers, creditors and international financial institutions during periods of normality can significantly contribute to achieving both goals. Opening and maintaining channels of communication and cooperation among these partners are needed at home and across the entire international financial system.

The IMF encourages countries to do everything in their power to be less vulnerable to crisis, for example, maintaining the level of public debt, fighting inflation and avoid unsustainable exchange rate regimes, accountability debt and strengthening domestic financial systems.

To achieve this, the IMF has intensified the work of regular scrutiny of the economic policy of member countries, by conducting assessments of national financial systems in cooperation with the World Bank, and also offering precautionary credit lines to countries that put in place measures crisis prevention but, nevertheless, continue to feel vulnerable. Together with other agencies, the IMF encourages countries to adhere to the rules and codes of good practice in a wide range of economic measures.

However, the crises have not disappeared. When there, government institutions lack sufficient resources to bear all the burden of financing needs of a country. It would also be desirable to have that level of resources. It is therefore important to encourage the participation of private sector creditors in resolving the crisis, reaching cooperative solutions to payment problems. If the effort to agree to a voluntary approach would not result, creditors may have to accept some limitation to their immediate demands for repayment, and to bear some losses.

The international community has sought the participation of private sector creditors in resolving financial crises in several countries in recent years. The specific mechanism has evolved on a case by case, depending on the nature of the crisis and the characteristics of the creditors. There are now several important questions: Can you clearly identify the “rules of the game” for private sector involvement? How can private sector involvement in resolving a crisis is less painful and more efficient? The answer to these questions is one of the most difficult challenges facing the global community when it comes to reforming the international financial architecture.

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Tasty pastries are not found easily. Our objective in this report is not plum or discover the ‘ofertón’ of each brand, but guidance to finance a vehicle. We have placed considerable emphasis on the different options you have to pay for the car of your dreams. But you must know certain terms that appear on your purchase contract. The TIN, the APR, fees for opening and cancellation of all, renting … I do not play in Chinese.

You have several options for funding and to ignore the issue, you made a mess? Would you have liked to buy the car for cash but your financial situation prevents you and you have to finance it? Relax, do not worry, just like you that there are many more people. In fact, according to a study by Ganvam (National Association of Motor Vehicle Sales, Repair and Spare Parts) and Automotive Finance Professionals, the funding is the most common form of payment among Spanish consumers when purchasing a vehicle, to the point that today 84 percent of cars purchased through this formula.

To choose one or another financing option, plus details of current opportunities that exist, you must also know the documentation is usually required when one wants to formalize a loan. In the same way, we recommend that you know the types of loans that are at the time that you should know the meaning of certain key terms for your financing. I explained everything, but also give you a series of tips and recommendations. In fact, we suggest that you are patient and do not accept the first offer you. If you are interested in a particular market, visit several dealerships and keep the lowest price. From there, you must initiate another round of visits to find the best financing option. Other tips can be found on the ‘Recommendations’ of the story.

Main options
Roughly speaking, there are two main options in the financing of a vehicle: First, through financial institutions, banks and building, and secondly, through its own financial brands. Both options are the most widespread forms of financing, but not unique, since in recent years have emerged so-called business credit fast. Here’s all three, plus details of two formulas that are becoming increasingly popular as they are leasing and renting.

1) Financial institutions, banks and

They are the first choice that every consumer should keep in mind. In many banks and, if you have located a number of payroll and bills, you can offer more advantageous conditions and interests that specialized institutions or to financial brands. If not, simply take any account opened in your name a few banks offer certain advantages. A possible drawback is the significant delay with respect to the financial brand. Sometimes, also tend to ask you a guarantee.

In this type of option, together with the other possibilities (financial brands and companies fast loans) suggest questions by a number of terms that appear on your loan. These words, which are explained in the section ‘terms are the TIN (Nominal Interest Rate), fees, depreciation and partial cancellation and APR (annual percentage rate). Asked by them, do not forget to none. When you have evidence from different sources of funding, then choose the one that suits you.

2) Financial brands

Present interests and conditions similar to those of banks and savings banks. Sometimes, they offer very good conditions, but in these cases the time to pay the loan is very short. Other times, by the way Multiopción (Fiat, for example, Formula Fiat calls it), we offer financiarte at first only a portion of the car, which shares will have more casualties. Once paid for all, we offer the following possibilities: change your car for another of the same brand; returned without explanation, at no additional cost and without risk of depreciation, and you guarantee the minimum value at the date of termination, continue your car with the last installment paid in cash, or refinance.

3) Business credit fast / virtual banking

They are companies that provide loans in just 24-48 hours. Some of the best known are Mediatis, Cofidis and Credial. They are usually not very demanding in asking for documentation, for only showing the last payroll is sufficient. In the media, announcing a drum and cymbal with slogans such as’ The loan for your car, just 24 hours. Is perhaps its only advantage, as they offer very high interest rates when compared with those of the depositories or banks. The Organization of Consumers and Users (OCU) discourages such businesses.

4) The leasing and renting leasing contract is also known as financial leases.

It is a contract by which the lessor transfers the right to use a vehicle on payment of rent (rent) for a specified period. After this period, the lessee has the option to purchase the leased property by paying a certain price, return or renew the contract.

The leasing is another form of renting a car can last between 3 and 5 years, but that does not, a priori, the purchase option at the end of the contracted period. In this case the client seeks, rather than an investment, the functionality. Through the monthly fee, the leasing company covers the entire vehicle maintenance, repairs, taxes, insurance, roadside assistance and replacement of tires. A disadvantage presented by renting, according to the OCU, is that if you decide to cancel the contract before the stipulated time, will pay a very high penalty.

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One of the biggest problems encountered in negotiating the purchase of a car is finance. It is very important to investigate this subject very well before making the final decision. Once we are completely sure which is the vehicle that meets all our needs, the next step is to negotiate the price (and here there is a caveat, is not the same price you paid). It is very important to negotiate the price first and then the monthly payment, since the end of the monthly payment is determined by the amount that we will fund.

We need to focus initially on the price and the best way is to investigate what the actual value of the car you are buying, whether it is new or used. The best tool we have today to accomplish this task is definitely the Internet.

We can find the price of any car that is in the market, it is only a matter of knowing look. Although the information we obtain from the network may not be accurate, it is very close to reality and give us an idea about the price we are looking for.

To get a good deal is vital to have very clear how to handle the negotiation stage. If you request a discount of hundreds, possibly very successful, but how to know if it had not achieved a discount of thousands? As the old saying good negotiator: if you want ten, asked twenty, to give you fifteen ¿. Join this very high and keep in mind when negotiating.

So you will know what the margin utilildad is the seller and able to use that information to them. And remember: you are the one who has the money (in the end, that we are talking about), depends on you the last word. If you do not get the price you are willing to pay, then keep looking. Do not let a good seller to do business with you.

Regarding funding, it is very important to know what the real interest, since this is based on different variables. The first is our credit is essential to have a clear concept of what it represents. This information will be of great help when negotiating the monthly payment. A good credit history is not only accomplished with the payments on time but also with the use that we give to our credit (it is not advisable to use it in its entirety, but not leave it at zero.)

Contrary to what many think, in terms of credit, the average score is what is more, as well as how long it takes to build the credit.

Another detail to take into account: find out what current interest rates. Do not take as the interests of manufacturers, as these are not entirely real. In general, manufacturers offer a choice between a low-interest or repayment of the company. This is because the manufacturer covers the cost that the grant represents an interest (often zero) to this refund.

Hope that this information is of most value possible, be attentive to your questions and comments.

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