Sovereign Debt Crises and Negotiations in Brazil and Mexico, 1888-1914 : Governments Versus Bankers

"This book analyzes the relative balance of bargaining power between governments and the banks in charge of underwriting their debt during the first financial globalization. Brazil and Mexico, both indebted countries that underwent major changes in reputation and negotiating power as they faced financial crises, provide valuable case studies of government strategies for obtaining the best possible outcomes. Previous literature has focused on bankers' perspectives and emphasized that debtors were submissive during negotiations, but Weller finds that governments' negotiating power varied over time. He presents a new analytical framework that interprets when and why officials were likely to negotiate loans more or less effectively, with newly uncovered primary sources from debtors' and creditors' archives suggesting key causes of variation: fiscal accounts, political stability, and creditors' exposure and reputation." [source : 4e de couv.] Preface 6 Acknowledgements 9 Contents 11 List of Figures 14 List of Tables 15 Part I Governments versus Bankers 17 Chapter 1 Introduction 18 Governments and Banks in the First Financial Globalisation 19 The Pre-1914 Sovereign Debt Market 21 Book Outline 24 Part I—Governments versus Bankers 25 Parts II—Brazil versus Rothschilds 26 Part III—Mexico versus Mediocre Banks 30 References 34 Chapter 2 Governments versus Bankers in the Pre-1914 Sovereign Debt Market 36 Theory and History of Sovereign Debt 37 Rescue Loans and the Government’s Side of Sovereign Debt 41 The Government’s Choice: Patron Banking or Competition 45 Analytical Framework 47 Conclusion 52 References 52 Part II Brazil versus Rothschilds 55 Chapter 3 Rothschilds’ Tropical Empire: Brazil, 1822–1889 56 Rothschilds Picks a Tropical Empire 57 Brazil’s First Crisis and Rescue Loan 60 The Return of Rothschilds 61 Paraguayan War and Debt Boom 64 The Falling Empire and Its Exposed Bank 66 Conclusion 68 References 69 Chapter 4 Rothschilds’ Troubled Republic: Brazil, 1889–1898 72 Regime Change, Chaos and Stabilisation 73 The Fiscal Collapse 76 Rothschilds’ Credit Umbrella 79 Brazil as a Free Rider 83 The Funding Loan as Shared Policy Ownership 86 Rothschilds as a Power Broker 89 Conclusion 92 References 92 Chapter 5 Rothschilds and Coffee Finance: Brazil, 1898–1914 96 The Republic Borrows Again 97 Brazil Suspends Rothschilds’ Monopoly 99 The Coffee Lobby 101 Brazil’s Unorthodox Gold Standard 104 Another Debt Crisis 107 Rothschilds Rescues Again: The Second Funding Loan 110 Conclusion 113 References 113 Part III Mexico versus Mediocre Banks 116 Chapter 6 From Defaults to Redemption: Mexico, 1821–1890 117 Wars, Invasions and Failed State 118 The Serial Defaulter 121 The Rise of Porfirio Díaz 124 Railways, Banamex and Fiscal Accounts 126 Díaz, Noetzlin and Sovereign Debt 130 Mexico Returns to the Market 131 Díaz Refuses a Patron Bank 133 Conclusion 135 References 135 Chapter 7 The Bankers’ Beloved Dictatorship: Mexico, 1890–1910 139 The Establishment of a Reputation 140 Gaining the Upper Hand: The 1899 Loan 143 Mexico Goes to New York: The 1904 Loan 149 Porfiriato’s Finest Hour: The 1910 Loan 154 Conclusion 156 References 157 Chapter 8 The Loans of the Revolution: Mexico, 1911–1914 159 The Mexican Revolution 160 The Fiscal Impact of the Revolution 163 The 1913 Loan 164 Paribas, Asymmetry of Information and Conflict of Interest 166 Speyers and the Nacional Railway 170 Conclusion 172 References 172 Chapter 9 Conclusion 175 Appendix: Data and Sources 180 References 183 Index 185 Front Matter ....Pages i-xx Front Matter ....Pages 1-1 Introduction (Leonardo Weller)....Pages 3-20 Governments versus Bankers in the Pre-1914 Sovereign Debt Market (Leonardo Weller)....Pages 21-39 Front Matter ....Pages 41-41 Rothschilds’ Tropical Empire: Brazil, 1822–1889 (Leonardo Weller)....Pages 43-58 Rothschilds’ Troubled Republic: Brazil, 1889–1898 (Leonardo Weller)....Pages 59-82 Rothschilds and Coffee Finance: Brazil, 1898–1914 (Leonardo Weller)....Pages 83-102 Front Matter ....Pages 103-103 From Defaults to Redemption: Mexico, 1821–1890 (Leonardo Weller)....Pages 105-126 The Bankers’ Beloved Dictatorship: Mexico, 1890–1910 (Leonardo Weller)....Pages 127-146 The Loans of the Revolution: Mexico, 1911–1914 (Leonardo Weller)....Pages 147-162 Conclusion (Leonardo Weller)....Pages 163-167 Back Matter ....Pages 169-183