Development Financing and Changes in Circumstances

The 1980s saw a debt crisis among developing countries that indicated a deeper, dangerous fault in the foundations of financial mechanisms. Rocha argues that contractually provided adaptation mechanisms can help avoid the disruption of medium- and long-term financing transactions; he also challenges the current practice of hazardous and resource-consuming ad hoc debt rescheduling that has characterized debt tremors to date. General adoption of these flexible adaptation mechanisms would be, argues Rocha, like flexible construction joints in an earthquake: both debtors and lenders would be more stable in the rocky environment of international finance.