Leonardo Weller, professor da FGV EESP, lança o livro: Sovereign Debt Crises and Negotiations in Brazil and Mexico, 1888-1914: Governments versus Bankers
2 min de leitura
The book analyses the relations between the governments of Brazil and Mexico and the banks in charge of underwriting their debt during the first financial globalization, from the 1880s to 1914. It shows that the governments were not always submissive to bankers when negotiating loans, as one would assume from the bulk of the literature. Depending on the circumstances, they had the upper-hand in debt negotiations.
Brazil and Mexico make a good pair of case studies because both countries faced debt crises, even though they had opposite payment records. Brazil was the only Latin American country that did not default on its debt in the nineteenth century. The government built a long-lasting association with Rothschilds, the world’s premier bank, which underwrote nearly all the country’s loans. As Brazil borrowed, Rothschilds became exposed: by the 1900s, Brazilian debt accounted for about a third of all the bonds the bank had ever underwritten on its own. Exposure allowed the government to free ride on Rothschilds’ credit umbrella during debt crises that hit the country in the 1890s and the 1910s. The Brazilian officials pressured for cheap credit in the form of rescue loans so that they could run politically-driven expansionist policies without defaulting on the debt.
Mexico was among the world’s worst borrowers until Porfirio Díaz (1876-1911) pacified the country. The dictator built a state virtually from scratch. His government improved fiscal accounts and established a reputation among creditors. Mexico refused to grant a monopoly on its debt to a single patron bank. Instead, it fostered competition among second-rank underwriters to issue loans at good rates. The relative power over the banks changed once the 1910s Revolution deteriorated payment capacity. In the middle of a civil war and short of funds, the government accepted whatever the underwriters offered and borrowed on rather adverse terms.
The governments’ relative power varied depending on their reputation as borrowers. In general, the banks were powerful when they had a high status on the debt underwriting market. Yet exposed premium banks became relatively weak when their clients faced crises, for such troubled governments had the leverage to pressure for rescue loans.
