rrying a coupon at a spread over LIBOR). U.S. Treasury zero-coupon bonds are placed in escrow by the sovereign issuer to guarantee payment of the principal, and sometimes of the interest. Other types of Brady instruments (debt-conversion bonds, new-money bonds, front-loaded interest-reduction bonds, and interest-arrears bonds) are structured differently. These other bond types are not collateralized and have shorter maturities·ranging from 10-to-20 years. By the end of 1994, more than $100 billion in Brady bonds were outstanding.
In 1993, the U.S. Department of Commerce identified 10 economies as "big emerging markets" (BEMs) for both American investments and exports (Broad and Cavanaugh 19). The Commerce Departments BEM list has been expanded, and now includes all ASEAN countries, China (P.R.C.), Hong Kong, Taiwan, South Korea, India, South Africa, Poland, Turkey, Argentina, Brazil, and Mexico (Big 9). Both the emerging market concept and the United States government's BEM Initiative are elements of global economic reform and international financial change (Naim 112).
The Mexican financial collapse of late-1994 took the world by surprise (Naim 112). Mexico had attracted a "lot of acclaim for its economic reforms of the proceeding years, largely following the US-backed model for economic development. But Mexico's new economic system showed itself to be powerless in the face of external factors beyond its control" (Naim 112).
The government of Mexican President Salinas renegotiated the country's massive foreign debt, initiated market reforms that boosted the country's international prestige, and successfully negotiated entry into NAFTA with Canada and the United States (Naim 117). "Mexico soon became a main beneficiary of the unprecedented surge in private capital flow, a favorite son among the 'emerging markets.' Between 1990 and 1994, Mexico became the world's second-largest recipient of foreign private investment, ...