Gray, PhilipIrwin, Timothy2012-08-132012-08-132003-12https://hdl.handle.net/10986/11286Each year developing countries seek billions of dollars of investment in their infrastructure, and private investors, mostly in rich countries, seek places to invest trillions of dollars of new savings. Private foreign investment in the infrastructure of developing countries would seem to hold great promise. But foreign investors must cope with volatile developing country currencies. Many attempts to do so have created as many problems as they have solved. This note proposes that investors take on all financing-related exchange rate risk, even though this may mean higher tariffs for consumers as a premium for bearing that risk.CC BY 3.0 IGOADJUSTMENT MECHANISMSADVERSE EFFECTBUDGET DEFICITSCAPITAL MARKETSCOMMUNICATIONS DEVELOPMENTCONSUMER PRICE INDEXCONTRACTUAL SAVINGSCONTRACTUAL SAVINGS INSTITUTIONSCREDITORSCURRENCY CRISESDEBT FINANCINGDEBT SERVICEDERIVATIVESDEVALUATIONDEVELOPING COUNTRIESDOLLAR BONDSEMERGING MARKETSEQUITY INVESTORSEQUITY MARKETSEXCHANGE RATEEXCHANGE RATE MOVEMENTSEXCHANGE RATE RISKEXCHANGE RATE RISKSEXCHANGE RATESEXPOSUREFINANCIAL STRUCTUREFOREIGN CAPITALFOREIGN CURRENCYFOREIGN CURRENCY DEBTFOREIGN DEBTFOREIGN EQUITYFOREIGN EXCHANGEFOREIGN EXCHANGE RISKFOREIGN INVESTORSHEDGESHOST COUNTRYIMPLICIT SUBSIDIESINFRASTRUCTURE PROJECTINFRASTRUCTURE PROJECTSINNOVATIVE FINANCINGINSURANCE COMPANIESINTEREST RATEINVESTMENT CORPORATIONLIFE INSURANCELIQUIDITYLIQUIDITY FACILITYLOANLOCAL CAPITAL MARKETSLOCAL CURRENCYLOCAL CURRENCY FINANCINGLOCAL DEBTLOCAL INFLATIONLONG TERMMACROECONOMIC CRISESMACROECONOMIC POLICIESMATURITYMUTUAL FUNDSOPTIMAL ALLOCATIONOUTPUTSPENSIONPENSION FUNDSPENSION PLANSPRICE INCREASESPRIVATE FINANCEPRIVATE INFRASTRUCTUREPRIVATE INVESTMENTPRIVATE INVESTORSPRIVATE SECTORPRIVATE SECTOR DEVELOPMENTPRIVATIZATIONSPUBLIC POLICYRATE OF DEPRECIATIONRATES OF RETURNRENEGOTIATIONREPAYMENTRETURNREVOLVING LOANRISK SHARINGSAVINGS RATESSHAREHOLDERSTARIFF INCREASESVOLATILITYWORLD PRICEWorld Bank10.1596/11286