Raise the debt: how developing countries choose their creditors
In: Oxford scholarship online
Why do some governments borrow from China, while others borrow from the United States or the International Monetary Fund (IMF)? This work systematically explains how governments choose among competing loan offers. As the strings attached to loans vary across creditors, domestic interest groups prefer one type of creditor to the other. However, interest groups disagree about which creditor is preferable. Governments cater to whichever domestic interest group coalition is dominant by borrowing from the coalition's preferred creditor. The text offers evidence from Ecuador, Peru, and Colombia as well as an extensive statistical analysis. The results show that borrowing portfolios around the world reflect the relative strength of societal interest groups.