<< Is this aid package actually going to avert Brazil's crisis? >>
Hi Paul,
I doubt it ... I got hung up on an number of points in the proposal, but choked on these two in particular.
John
<< But the move nevertheless represents a major gamble. Brazil has more than $250 billion in debts coming due in the next several months and the IMF is essentially betting that investors will be satisfied enough with the terms of the package to keep their money in the country and roll over their loans. >>
Now let me see, what they are saying is that if I owe $250 billion and can't pay, if I can get someone else to loan me another $40 billion, then I will impress my creditors so much that they won't ask for their money back. Sounds like a very sound business concept!
<< Brazil is not putting up any collateral for its loan, unlike Mexico, which pledged its oil revenue. But like Mexico, Brazil will pay a high interest rate -- about 4 percentage points above the Treasury's own borrowing costs -- on any borrowings from Washington. >>
This reminds me of when we owned our computer retail business. When a customer couldn't pay, he would always say 'but I will pay you extra interest'. TILT ... It doesn't matter what interest he offers, if he isn't going to pay you anyway!
FWIW, we usually took 'extra interest' as a sign of desperation and immediately sent the account to D&B for collection.
BWDIK
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U.S., IMF Announce Plan To Avert Brazilian Crisis
washingtonpost.com |
