Dubai debt woes raise fears of problems across the globe
By Landon Thomas Jr.
The New York Times
Of the many economies that gorged on debt in the boom years, Dubai stood out.
In the space of a few years the emirate’s investment arm, Dubai World, racked up $59 billion in debt, borrowing to build lavish developments like a giant island shaped like a palm tree and to invest in glittery properties abroad like the MGM Grand Casino in Las Vegas.
On Wednesday, Dubai requested that Dubai World be allowed to skip six months of interest payments on its debt.
The resulting fear that Dubai might not be able to pay its bills sent a wave of uncertainty rippling through markets, including Mexico's Bolsa de Valores, just as investors thought the worst of the global financial instability was over.
In a worst-case contagion, Bank of America analysts wrote Friday, “One cannot rule out — as a tail-risk — a case where this would escalate into a major sovereign default problem, which would then resonate across global emerging markets in the same way that Argentina did in the early 2000s or Russia in the late 1990s.”
