Sankar, I do not think that requiring foreign lenders that lend in foreign currencies accept repayment in the "then prevailing" exchange rates, in Korea will be smart. This will shift the onus of taking currency devaluation risks to the creditors from the borrowers, and guess what, credit for borrowers in developing countries (where such currency risks are higher) will dry overnoight, precipitating a world wide drying of lending. Debt should be repaid according to the letter of indebtness, no more no less. If a debt was borrowed in WON at a higher rate, that higher interest rate is the premium for devaluation risks, just as the dollar denominated debt are usually going at just a small premium above the LIBOR, thus providing less rate of return but greater security of the "international" currency security of the principal. If they force lenders to accept your proposal, the next currency crisis will result in hyperinflation in local currency terms, just as it did in Germany in the early thirties. We already know what happens to political stability when that is allowed to happen.
A better solution would be for the chaebols to find partners, like the dea; that Daewoo is trying to strike with GM, where actuaslcash is brought in exchange for help in shouldering the debt burden and cash (and of course GM pick up 50% equity in the automotive division of Daewoo).
Zeev |
