THE ROLE OF THE LAWYER IN EXTERNAL DEBT MANAGEMENT
by Mr. Lee C. Buchheit
(Article Reference: Document No.5, October 1995)

IV. Conclusion

For many countries, the management of an external borrowing program is one of the most important responsibilities of the government. When it is handled properly, the benefits for the country can be very gratifying. When it is handled badly, the consequences can be equally visible - contraction of living standards, inflation, devaluation, unemployment and so forth. The massive sovereign debt problems of the 1980s and early 1990s are eloquent testimony to the terrible price that countries must pay when their external debt problems get out of hand.

Even at the level of individual credit transactions, the difference between a well-negotiated agreement and a poor one can be very significant. A reduction of 50 basis points in the interest rate margin can mean millions of dollars in savings over the life of the loan. A skillfully negotiated negative pledge clause can mean the difference between having access to secured financings in the future rather than having to pay very high rates for unsecured facilities.

The importance of a country's external borrowing program should drive the seriousness with which it recruits and trains the professionals that will be in charge of implementing the program. Because all credit facilities are, in the final analysis, legal relationships between the lenders and the borrower, lawyers must participate in this process to some extent. The prudent borrower, however, will rely upon its legal advisers as an integral part of its debt management team throughout the entire borrowing process.

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