Wikipedia:Reference desk/Archives/Humanities/2018 September 23

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September 23

Is Mexico on the verge of defaulting on parts it’s national debt before Andrés López Obrador take office ?

All bonds issued by Mexico with maturity scheduled for 2018 are traded at a huge discount of their face value (I mean whatever currency or stock exchange used here’s an example). For reference, they are traded at only ¼ of Venezualian bonds discount value which is rated as being on selective default.

This situation seems to be ongoing since the 2000s when the bonds where issued. I failed to find any information on why those bonds won’t be paid back.

What can explain such future default since the bonds where all issed after 1982 ? 77.136.40.166 (talk) 00:11, 23 September 2018 (UTC)

Investors obviously think there's a risk of default greater than that of some other sovereign issuers. They can't see the future any more than you. They don't know Mexico will default. Additionally, many of the investors probably are outside of Mexico, so the bond price reflects currency risk as well as default risk. On the topic of Venezuela, a brief Google News search for "venezuela bonds" seems to indicate that many buying the bonds are speculators who acknowledge the high risk but think there's a chance they'll come out ahead in a debt restructuring or similar event. Without these speculators the price would be even lower. --47.146.63.87 (talk) 21:31, 24 September 2018 (UTC)

As I understand it, the usual reason for buying such bonds is to make money from the interest they earn during their lifetime. Since that lifetime is now virtually up, buying (for example) a 2018-maturing $1000-dollar bond at face value now would return to the buyer very little more than $1000 in a very short time, so there'd be little point in the purchase. The only sellers will be those who desperately need some capital right now, so are forced to sell the bonds at a discount that will yield the buyers an acceptable return for their money. Is this analysis wrong? {The poster formerly known as 87.81.230.195} 2.221.81.75 (talk) 08:21, 25 September 2018 (UTC)

I think the posts above are partially missing the point of the OP's question. Bonds aren't something I've dealt with much so while I have some idea of what the coupon rate, yield curve etc mean, I don't quite understand the figures in the above link. In particular what does a trading value quoted as ~4.47% mean? The obvious thought is that it's a percent of the face value except that the value is so low. But if I look at German bonds [1] which are newer and have a value quoted at ~100% and the aforementioned Venezuela bonds older but with a longer term [2] and a value quoted at 22.930%.

So German bonds are actually trading at about of very slightly above their face value. If I want €1000 (I assume these are Euro denominated) I would have to pay more than €1000. This isn't that surprising considering the confidence people may have in the German government etc. Likewise for Venezuela, given the strong risk of default, people aren't willing to buy it except at a strong discount to their face value. Other sources mentioning Venezuelan bonds similarly mention them trading at e.g. 28 cents to the dollar [3]. This may be higher than it could be because of speculators etc. It's significantly higher than these Mexican bonds, as the OP said 4x or more.

But none of that really explains why the Mexican bonds are so low. I mean sure the second IP is right that people will only get the face value back, but I don't see how that explains such a low value. Some discount sure, but if you had the money to throw around, why wouldn't you buy a bunch of these figuring that there's a decent chance you'd get 20x back in a few months? I'm not an investor or speculator but it seems to me even 50% discount off the face value is a little high. (I.E. 2x return is good enough given the risk etc.)

While the first IP is right about all those, I wouldn't be surprised if the OP is aware of all of them. I was when I first saw this question before any replies (didn't reply because I couldn't figure it out). Investors obviously don't know Mexico is going to default, but if these bonds really are trading at ~4.5% of the face value, this surely suggests they either think there's a very good chance they will for these bonds. They're giving it a far far higher chance than even Venezuela for many of their bonds. Or alternatively, they think the Mexican peso which I assume these bonds are denominated in is going to utterly collapse. Or currency or capital controls will be implemented. Or some combination of these.

But why do they think so? There's nothing the OP or me are aware of, nor specified above as to why investors feel so, which I think is ultimately the OP's question. Efficient-market hypothesis and all that, it would seem that there should be some info that is somewhat public knowledge as to why these bonds are trading so low. The alternative is that I and I think the OP have misunderstood what the above site is saying, or it's broken.

Nil Einne (talk) 09:31, 26 September 2018 (UTC)

I’m original poster, I would also had that Mexico bonds for 2115 maturity are traded are 80% of face value : something reasonable for a 100 years maturity bond. So it seems there something specific about 2018 bonds.

Yes, the face 4.5% value is correct for those bonds : it really means that if paid back, any individual investor could get 1 million with only 30000€ in less than 3 months. Yet, Mexico doesn’t have any kind of capital control, nor did I found information about if the state is insolvent (there won’t be any solvency problem before Andrés López Obrador according to the news). 2001:861:3A00:61C0:81B4:8EC6:5F43:C721 (talk) 11:40, 26 September 2018 (UTC)

Latin Americans of British descent in the Great War

David Lloyd George devotes a chapter of his War Memoirs to the contribution to the war effort made by the British Empire. In it he also mentions people of British descent who had settled under foreign flags. "It is estimated that about 12,000 came from Latin America... Numbers of these were sons or grandsons of former British emigrants, and though born to another citizenship, were proud to claim their British inheritance, even though it was an inheritance of sacrifice. These Latin-Americans of British stock fought well. Among the decorations they won were three V.C.'s and 188 M.C.'s" I would be interested to know who the VC's were, and (more ambitiously) the MC's. Thank you, DuncanHill (talk) 13:51, 23 September 2018 (UTC)

I guess my process of "clicking on every one of them and looking at their birthplace" isn't completely conclusive, but none of the people in our list of First World War Victoria Cross recipients were born in Latin America/South America (the rest of Lloyd George's quote mentions soldiers from Argentina). There are a few from the West Indies, but not for the First World War. But of course it's possible that they were born elsewhere and were considered Latin American for some other reason. Adam Bishop (talk) 19:11, 23 September 2018 (UTC)

Many of the settlers in Argentina would have been Welsh, if that helps in your research. I have no idea if any of them were awarded the VC. See Y Wladfa. --Jayron32 13:37, 24 September 2018 (UTC)

See also Great European immigration wave to Argentina. Although the British were not prominent in this, there were some (mostly Welsh, Scottish and Irish rather than English), particularly associated with the building of Argentina's Railway system, in addition to Y Wladfa mentioned by Jayron. {The poster formerly known as 87.81.230.195} 2.221.81.75 (talk) 08:34, 25 September 2018 (UTC)

See also English Argentines and British Chilean. A lengthy Google search failed to find any WWI VCs in that connection. Alansplodge (talk) 08:53, 25 September 2018 (UTC)

We have a whole bunch of articles on British Latin Americans, but I still can't find any who received VCs either. Adam Bishop (talk) 14:28, 25 September 2018 (UTC)