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," says...
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