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11/21/08

Ecuador and Brazil rock them gently to sleep


It's like watching a movie; you know it's fiction but you suspend disbelief and get carried along by the story. Follow the bouncing ball, dudettes and dudes:
  • Studmuffin receives the illegitimate debt report from the CAIC commission in late September. To quote the commission Veep from Tuesday, "It is not that the President does not know the report, because it was delivered at the end of September as was our commitment."
  • Five weeks later, Studmuffin puts the international finance community on the hook for the $3.9Bn or so in illegitimate bonds (i.e. the Globals 2012, 2015 and 2030).
  • But he starts the ball rolling by saying "definitely won't pay the $320m in Brazilian BNDES bonds."
  • All the while saying, "We're willing to negotiate, of course".
So today Brazil recalls its ambassador to Ecuador for consultations, and suitably grave noises come from Brazilian functionaries.

ARE YOU TELLING ME THAT LULA DIDN'T KNOW WHAT CORREA WAS PLANNING TO DO? Gimme a break!

Otto bets $5 on the following: Brazil is being used as a lead precedent in the bonds negotiations. In the next few days we'll witness huffing and puffing from both sides, with gleeful media writing stories about how the Socialist axis has broken and how Correa has gone too far. Then the two sides sit down and spend hours thrashing out a deal (that's already been planned). Once the little charade is over, Correa looks the BIG bondholders in the eye and says "wanna come talk, too?". Thus meekly they walk in, they have their own little trasharound and a deal is struck (at some kind of haircut or reduced interest payment or combo or variation thereof).

Any takers? What odds will you give me for this scenario, sportsfans?