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The New Public FinanceResponding to Global Challenges$
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Inge Kaul and Pedro Conceiçāo

Print publication date: 2006

Print ISBN-13: 9780195179972

Published to Oxford Scholarship Online: October 2011

DOI: 10.1093/acprof:oso/9780195179972.001.0001

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Mitigating the Risks of Investing in Developing Countries

Mitigating the Risks of Investing in Developing Countries

Currency-Related Guarantee Instruments for Infrastructure Projects

(p.585) Mitigating the Risks of Investing in Developing Countries
The New Public Finance

Inge Kaul

Pedro Conceiçāo

Oxford University Press

This chapter examines how public investment guarantees can facilitate infrastructure investment in developing countries, focusing on guarantee by multilateral and bilateral agencies to debt investors in infrastructure projects. It describes the main risks that investors in infrastructure services in developing countries typically face and the main types of public guarantee instruments currently being offered. The findings reveal that while the existing guarantee products from multilateral development banks and bilateral export credit agencies can lower the costs of capital and lengthen maturities, currency-related risks remain inadequately covered. To address this problem, this chapter proposes complementary guarantee instruments including contingent liquidity facilities, countercyclical guarantees and sovereign risk pools.

Keywords:   investment guarantees, infrastructure investment, public investment, investment risk, developing countries, sovereign risk pools, countercyclical guarantees, liquidity facilities

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