Rebirth of India: Superior

"What did I hear correctly? You, the big boss Pandit, still need a loan." In fact, it's not surprising that Ye Zhenli was surprised, because he knew Shakru's capital very well. Apart from other things, his Ganges Pharmaceutical Factory was a goose that laid golden eggs. How could it need a loan? And even if it needed a loan, it didn't need to go all the way to Mexico to get a loan. This matter sounded strange.

Shakru thought for a while, and then explained: "Well, it's like this. I think there may be problems with the Mexican peso recently, so I plan to short it. Simply put, it's to lend pesos, and then exchange them for US dollars in the bank. When the peso depreciates, use the US dollars to exchange back to pesos and return them to the bank to make a profit." Peso is the currency of Mexico, but the currencies of Argentina, the Philippines, and Cuba are also called pesos, and the Mexican peso is the largest in circulation.

There is a reason why Shakru chose to borrow money in Mexico this time, because in his memory, Mexico broke out a financial crisis from the end of 1994 to the beginning of 1995, with a sharp drop in the peso exchange rate and a collapse in stock prices. Since Mexico pursued an active import substitution development policy after World War II, it has gradually established an industrialized national economic system, which is called the development model of a major emerging industrial country by the international economics community.

In 1992, Mexico's per capita GDP reached US$3,030, making it the second largest country in Latin America after Brazil. However, it was in this form that a financial crisis suddenly broke out in Mexico, which not only caused serious chaos in the country's financial market and the national finances were on the verge of collapse, but also affected neighboring countries and shocked the global financial community. For such a rare opportunity to make a fortune, speculators like Shakru naturally did not want to miss it.

After listening to Shakru's explanation, Ye Zhenli generally understood it, but he was not interested in it. In his opinion, doing so was troublesome and earned little. In fact, he thought so, because it was estimated that there were few businesses that could make more money than trafficking. So he answered casually: "Your business is too troublesome, I don't understand it very well, just tell me how much you want to borrow."

"Well, let's borrow 100 million pesos first, and then I'll have to trouble you to convert all of it into US dollars for me." The Mexican peso implements an exchange rate system pegged to the US dollar, basically 33.5 pesos to one US dollar, so 100 million pesos is about more than 30 million US dollars.

"What do you mean by 100 million? Your appetite is too big."

Shakru smiled bitterly: "There's no way. If you don't have a big appetite for this thing, there will be no profit at all. I might as well continue to sell Viagra."

"If yours is less, it's easy to deal with, but it's hard to borrow a large number like 100 million without using some collateral valuation," Ye Zhenli said with some embarrassment.

"Don't worry, I won't make it difficult for you. I can use my Ganges Pharmaceutical as collateral, as long as he can review and release the loan faster."

Hearing Shakru say this, Ye Zhenli immediately had a bottom line: "You said earlier that you were willing to use your pharmaceutical factory as collateral, then don't worry, there will definitely be no problem. I finally did a formal business once, who dares to delay me, then he simply doesn't want to live"

It must be said that Ye Zhenli's work efficiency is very high. It took less than half a month to help Shakru complete the loan procedures, and successfully exchanged 100 million Mexican pesos into US dollars, and did not charge any handling fees, just asked Shakru to help him send two batches of raw materials.

However, Ye Zhenli kindly advised Shakru: "Mr. Pandit, I have also learned about the financial knowledge and situation recently. To be honest, I think your deal is quite boring. Yes, the US interest rate hikes that began at the beginning of this year, from February to November 1994, the Federal Reserve raised the official interest rate four times, and finally raised it to 5.5%, which put a certain pressure on our Mexican financial market. Many short-term capitals did begin to flee in pursuit of high interest rates.

In addition, due to the widening gap between the rich and the poor in the country and the increasing number of unemployed people, the imbalance in economic development between sectors and regions has become more and more serious, especially this year's consecutive assassination of presidential candidates and the general secretary of the Institutional Revolutionary Party, but the decline in the stock market is not obvious. Even if there is a devaluation, it is difficult to see the large-scale devaluation you hope for, so I still advise you to think twice."

Shak Lu shook his head and said, "Mr. Ye, you have studied finance for too short a time. In fact, the economic bubble and international balance of payments deficit in Mexico are already too large, and it is difficult to change. First of all, due to the long-term policy of pegging the peso to the US dollar, in order to maintain the overvaluation of the peso against the US dollar, imports have been encouraged and exports have been suppressed, resulting in a continuous expansion of foreign trade deficits and operating deficits.

In addition, trade liberalization has caused Mexico to face an unprecedented trade crisis after joining the North American Free Trade Area. Generally speaking, if a country's exports are mainly labor- and resource-intensive products, due to the low elasticity of demand for such products, as the economic growth rate accelerates, exports will have a diminishing effect."

At this point, Shakru suddenly realized that he was not discussing the issue with his financial colleagues, so he changed his words and said, "Also, you don't know what my name is in India, the heir of divination and sacrifice, my divination is never wrong"

On Christmas Eve in 1994, late at night on December 19, the new Mexican government suddenly announced that the new peso, the national currency, would be devalued by 15%, greatly exceeding the upper limit of 40,000ths of the daily depreciation of the peso set by the previous government. This decision caused great panic in the market. Foreign investors frantically sold pesos and snapped up dollars, and the peso exchange rate fell sharply.

On December 20, the financial crisis officially broke out, and the exchange rate fell from the initial 3.47 pesos to one dollar to 3.925 pesos to one dollar, a sharp drop of 13%. On the 21st, it fell another 15%. With the depreciation of the peso, speculative activities in the financial market further intensified. Foreign investors withdrew funds in large quantities, and Mexico's foreign exchange reserves fell sharply by 4 billion US dollars in two days. By the 22nd, it had fallen to 42%, which is extremely rare in modern financial history.

Although Shakru knew that the price would drop by nearly 50% in two or three months, he didn't want to wait any longer. First, he was worried that things would get worse, and second, he had a plan to sniper in the near future. So on the 23rd, he started to reverse the peso. Just this one transaction, he made 12 million US dollars. To be continued.

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