Measures of political risk

["Nestor Gorojovsky" <nestorgoro@xxxxxxxxxxxxxxx>]

Michael Perlman wrote, answering Gary MacLennan on what "spreads over
US Treasuries" are:

"the difference between the rate of interest on US Treasuries and the
rate on something else."

The idea is that an American (Australian, Norwegian, Japanese, etc.)
investor should be careful when putting their monies to work in a
risky country. Thus, they charge an overhead that pays for eventual
losses due to changes in domestic policies, etc.

Once you charge that spread you are covering yourself in advance
against a widespread default, a nationalisation, and so on.

So that when foreign investors claim that, say, if Argentina or
Brazil default, they incur in losses,  they are lying because they
have already cashed in, by way of interest rates the size of a
brontosaur, the eventual losses that in the end these same interest
rates help to generate.

As a final coda: who are the arbiters that set the ratings? The same
careful guys at the international consulting firms who doctor the
books of American corporations in order to fool the American people
and grab their savings at the Stock Exchange.

Kind of funny, if you come to think about it...
Néstor Miguel Gorojovsky
nestorgoro@xxxxxxxxxxxxxxx

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"Aquel que no está orgulloso de su origen no valdrá nunca nada porque
empieza
por depreciarse a sí mismo".
Pedro Albizu Campos, compatriota puertorriqueño de todos los
latinoamericanos.
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