Loans of the revolution

How Mexico borrowed as the state collapsed in 1912-13

Dados Bibliográficos

ID3315264
AutoresLeonard Weller (0000-0002-5579-3285, Escola de Economia de São Paulo, autor correspondente)
Ano2019
Volume72
Fascículo3
Páginas1028-1047
Data de publicação2019-08-01
Peer ReviewedSim
Open AccessSim
TipoARTICLE
PeriódicoThe Economic History Review (JOURNAL)
Identificadores do periódicoISSN: 0013-0117 • E-ISSN: 1468-0289
EditoraWiley (PUBLISHER • GB)
DOI10.1111/ehr.12742
OpenAlexW2886078863
IdiomaEN
Citações recebidas1
Referências citadas23

This article assesses why the French and US banks Paribas and Speyers underwrote a series of loans to revolutionary Mexico in 1912 and 1913, when the state was in the process of collapsing. This is a case of a war debt that failed to prevent the borrowing government from suspending payments and subsequently falling. Based on unpublished primary documents, the article shows that the 1913 loan involved a conflict of interest. The credit delayed a default and sustained the price of Mexican securities while Paribas, its main underwriter, was liquidating its Mexican portfolio. Evidence also suggests the existence of asymmetry of information. Paribas accessed pessimistic but accurate first-hand information on Mexico, while the public read over-optimistic press reports. Paribas forced the government to sell the bonds on the primary market at a price that was low, controlling for publicly available data. It subsequently sold the bonds at a margin on the secondary market. An additional reason for the lending is the Nacional railway, a state-owned company that used a share of the funds to pay its debt. More exposed to Mexico than Paribas, the small and internationalized Speyers held the bad bonds it had underwritten

Bond · Bond market · Business · Debt · Economics · Financial system · Government (linguistics) · Loan · Margin (machine learning) · Monetary economics · Pessimism · Portfolio · Primary market · Secondary market · State (computer science) · Stock market · Underwriting · Economic Theory and Policy · Finance · Global Financial Crisis and Policies · Historical Economic and Social Studies

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