Exchange Rate Risk : Allocating Exchange Rate Risk in Private Infrastructure Projects

Each year developing countries seek billions of dollars of investment in their infrastructure, and private investors, mostly in rich countries, seek places to invest trillions of dollars of new savings. Private foreign investment in the infrastructure of developing countries would seem to hold great promise. But foreign investors must cope with volatile developing country currencies. Many attempts to do so have created as many problems as they have solved. This note proposes that investors take on all financing-related exchange rate risk, even though this may mean higher tariffs for consumers as a premium for bearing that risk.

Bibliographic Details

Main Authors:	Gray, Philip, Irwin, Timothy
Language:	English
Published:	World Bank, Washington, DC 2003-12
Subjects:	ADJUSTMENT MECHANISMS, ADVERSE EFFECT, BUDGET DEFICITS, CAPITAL MARKETS, COMMUNICATIONS DEVELOPMENT, CONSUMER PRICE INDEX, CONTRACTUAL SAVINGS, CONTRACTUAL SAVINGS INSTITUTIONS, CREDITORS, CURRENCY CRISES, DEBT FINANCING, DEBT SERVICE, DERIVATIVES, DEVALUATION, DEVELOPING COUNTRIES, DOLLAR BONDS, EMERGING MARKETS, EQUITY INVESTORS, EQUITY MARKETS, EXCHANGE RATE, EXCHANGE RATE MOVEMENTS, EXCHANGE RATE RISK, EXCHANGE RATE RISKS, EXCHANGE RATES, EXPOSURE, FINANCIAL STRUCTURE, FOREIGN CAPITAL, FOREIGN CURRENCY, FOREIGN CURRENCY DEBT, FOREIGN DEBT, FOREIGN EQUITY, FOREIGN EXCHANGE, FOREIGN EXCHANGE RISK, FOREIGN INVESTORS, HEDGES, HOST COUNTRY, IMPLICIT SUBSIDIES, INFRASTRUCTURE PROJECT, INFRASTRUCTURE PROJECTS, INNOVATIVE FINANCING, INSURANCE COMPANIES, INTEREST RATE, INVESTMENT CORPORATION, LIFE INSURANCE, LIQUIDITY, LIQUIDITY FACILITY, LOAN, LOCAL CAPITAL MARKETS, LOCAL CURRENCY, LOCAL CURRENCY FINANCING, LOCAL DEBT, LOCAL INFLATION, LONG TERM, MACROECONOMIC CRISES, MACROECONOMIC POLICIES, MATURITY, MUTUAL FUNDS, OPTIMAL ALLOCATION, OUTPUTS, PENSION, PENSION FUNDS, PENSION PLANS, PRICE INCREASES, PRIVATE FINANCE, PRIVATE INFRASTRUCTURE, PRIVATE INVESTMENT, PRIVATE INVESTORS, PRIVATE SECTOR, PRIVATE SECTOR DEVELOPMENT, PRIVATIZATIONS, PUBLIC POLICY, RATE OF DEPRECIATION, RATES OF RETURN, RENEGOTIATION, REPAYMENT, RETURN, REVOLVING LOAN, RISK SHARING, SAVINGS RATES, SHAREHOLDERS, TARIFF INCREASES, VOLATILITY, WORLD PRICE,
Online Access:	http://documents.worldbank.org/curated/en/2003/12/12120226/exchange-rate-risk-allocating-exchange-rate-risk-private-infrastructure-projects https://hdl.handle.net/10986/11286
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