Law Commons^™

Legal Protection Of Loans To Developing Country Borrowers, Lajos Schmidt

Vanderbilt Journal of Transnational Law

At the Bretton Woods Conference in July 1944, in introducing the proposal for what is today the World Bank, John Maynard Keynes predicted: "In the dangerous and precarious days which lie ahead, the risks of the lender will be inevitably large and most difficult to calculate. The risk premium reckoned on strict commercial principles may be beyond the capacity of an impoverished borrower to meet, and may itself contribute to the risks of ultimate default." Three decades later this problem of the gap between the developed-country lender's required risk premium and the developing-country borrower's ability to generate an investment return …