It seems it does. During 2008-2012, post-crisis, launching under English law increased spreads by more than a third on average. In other words, by choosing the UK law, a nation rated B+ (for example, Ecuador, Ghana, Greece, Pakistan and Zambia) apparently paid 7.7% interest rate per annum instead of 6 percent, and a nation rated BB (for example, Bangladesh, Nigeria, Serbia or Vietnam) paid nearly 5.7% instead of 4.5% (figure 1). Such an increase in spread is equivalent to a rating downgrade of 3 notches or more.
Last week I participated in the World Economic Forum Global Redesign Summit at Doha (see program ). In a brainstorming panel, the kind where you hit your head against the wall, I was asked the following question:
|Photo © Yosef Hadar / World Bank|
Despite the leftist tone of this question, it is important to note that being pro-labor does not imply a bias against capitalists. My response to this question can be summarized as follows:
1) Let labor markets work
2) Let's make realistic policies but not lose the long-term perspective
3) Let's think on a global scale.