A foreign firm wishing to build a factory in Latin America buys a debt note in the secondary market
Firm presents claim
to Central Bank for payment
in local currency
Proceeds used for
investment in debtor country
Firm pays $50,000
for $100,000 worth
of debt
CB pays firm
$90,000 worth
of pesos (depends on
CB’s leverage)
$90,000 worth of pesos
invested locally
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