These vulnerabilities stem from the fact that a larger share of public debt is financed externally as a result of, inter alia, relatively low savings ratios, while the region’s ability to service the associated external debt obligations is hampered by a relatively low level of exports. There are positive exceptions to this general trend of weak fiscal positions, one of which is Chile.
Such countries do, indeed, perform much better in terms of national savings and trade openness. In many countries in the Caribbean, public debt-to-GDP ratios are much higher than in Latin America, although public debt there is not financed externally. Domestic financing of public debt, however, creates a different source of vulnerability.