THE DEBT SWAPPERS
Mexico's position looked hopeless. Ita talks with the IMF
were breaking down. The Bank for International Settlements had just
said that it couldn't help. The peso was plummetting -- in 10 days
it had fallen by almost 50%. Even the Federal Reserve Board chairman
had become sufficiently concerned to make an emergency dash to Mexico
City to see the then finance minister, Jesus Silva Herzog. His mission:
to head off an apparently imminent default by the Mexicans on their
foreign debt.
Despite all this -- and Silva Herzog's departure a week after
Volcker's mid-June visit -- the price of most Mexican debt on the
secondary loan market was firm at around 60. There was no panic
selling. A major reason for international bankers' confidence was
that Mexico had finalized its long awaited plans for a capitalization
programme to allow multinational corporations to swap foreign currency
debt for peso equity capital,...
