Leslie Wayne, “Wall Street’s Newest Magic Show:  Investment Bankers are trying to turn third world debt into bonds and other securities that will lure investors,” The New York Times, September 13, 1987.

 

Many Wall Street investment bankers are trying to find profits in the $400 billion Latin American bank debt.  They believe that the loans given to Latin America can be packaged and sold as high-risk, high-yield securities.  Many investors expect huge returns when this process is actually complete, however, a workable plan has yet to be devised.  Also, many banks are objecting to this new proposal due to the huge losses that they would be faced with under the new plan. 

However, this opposition has not stopped Wall Street technician Michael Milken.  He and several top officials are working harder than ever to develop a plan concerning Latin American debt.  There is no official word on the proposal itself, yet many look toward Mexico as a main focus.  For example, Mexico’s oil industry could be converted into an equity investment, and this could also be done in several other countries as well. 

Even with these potential solutions to the huge debt problem, there are still many questions such as, “who will buy the securities? And at what price?”  Therefore, a solution to the Latin American debt problem has yet to be found.

 

 

Summary by:

Liz Garmatz