2.14.3 Brady Bonds
When a debtor can’t make its due payments, the result is often bankruptcy. When the debtor is a country and the creditors are banks, then a default can have global repercussions. In the late 1980s, Treasury Secretary Nicholas Brady offered a fix to Latin American countries with overwhelming commercial bank debt: introduce monetary reforms, and in return, the indebted countries were allowed to convert debt owed to U.S. banks into new sovereign debt securities. The result was Brady bonds, which are sovereign debt securities issued in U.S. dollars by Latin American and other developing countries. Over the next decade, billions of dollars of so-called Brady bonds were issued by dozens of countries around the world, including Mexico, Argentina, Brazil, Ecuador, Jordan,