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International Finance

12. Jose Angel Gurria, Mexico's chief debt negotiator and the architect of its swap program, questions the gain to Mexico from its swap program: "The latest restructuring package on our debt gives us 20 years to repay principal with no principal payments for seven years. So why are we giving money away? Why pay 88 cents for debt & is worth only 60 cents?" Comment on Senor Gurria's statement.

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ANSWER. Why pay even 60 cents on the dollar (which is tantamount to default) when Mexico could just default outright on its debts? Thus the real issue is whether Mexico should default now on its foreign debts ...

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