The financial and economic crisis thatstarted in the United States has finally impacted all urbancommunities and investment financing systems around theworld. Local governments grappling with the crisis face anumber of constraints which, though disparate in nature,have a cumulative effect. This phenomenon has created anumber of extremely difficult situations. In general terms,the consequences of the crisis can be felt on four levels:1) revenue-either generated by local governments or derivedfrom State transfers-which may be subject to sharp declines;2) expenditures, which are rising because of the slowdown ineconomic activity and the corresponding increases inunemployment and social welfare needs; 3) financingcapacities, which are shrinking owing to the difficulty inobtaining loans and the increase in the cost of money; and4) foreign investment, which has declined; operationsunderway, which have been put on hold in many instances; andprojects, which have either been cancelled or delayed. Thetwo major financing systems bond issues and banks whetherspecialized or not, have been heavily impacted. Governmentshave adopted different measures depending on political andinstitutional environment. The situation differs greatlyfrom one country to another. In some institutional contexts,local governments are relatively sheltered while in others,they are exposed. In terms of assets, local governments thatcan invest their funds in the market have been directlyaffected by losses in capital. The deterioration in localgovernment accounts is often one of the factors constrainingthe ability of these governments to borrow.
PDF
download
878987797
028-85220240
