Brazil's return to the capital markets in April 2003 after a year's absence was a closely watched event. Any slip up or misreading of the market could end in disaster. After all, this was the first international bond issue under the new government of President Luiz Inácio Lula da Silva. It was also Brazil's first appearance in the international bond market since hysteria in the markets drove Brazilian bonds and the currency to record lows in late 2002.
Many investors had feared Lula would follow Argentina's example and default on the public debt once he took office on January 1, 2003. However, Lula surprised the international markets by adhering to pro-market policies and vowing to honor the country's debt. By April, investors, who also needed to put money to work in a declining yield environment, were convinced Lula could be trusted.
"The stakes were very high,"...
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