From Bad Debts to Healthy Securities? The Theory and Financial Techniques of the Brady Plan
Posted: 8 May 1997
Date Written: April 1997
The securitization of foreign debt through the Brady program has provided greater flexibility to Latin American debtors and creditors. This not only allowed the dissemination of risk across a heterogeneous pool of agents, but it also allowed economic agents to price the debt securities according to market, economic, and political conditions, without overburdening any particular organization. The use of market mechanisms also provided investors with rewards in return for the assumption of risk. Furthermore, the securitization of debt provided a catalyst to promote further investment in the region. The recent Mexican devaluation has demonstrated that this type of market approach has imbued the emerging markets with a new resilience to face and absorb external shocks while minimizing the economic damage.
JEL Classification: E51, N26
Suggested Citation: Suggested Citation