Chapter 209 Peasant Riot

  Silva is talking about an armed peasant uprising in Chiapas (province). The riot happened in January, and it has not subsided until now, and there is a faint tendency to expand. Recently, the government has received news that this riot will spread to other states, which also means that the government army's encirclement and suppression of the armed riot has completely lost control.

   Once this news spreads, it will immediately cause a huge shock, even more shocking than the news that the Institutional Revolutionary Party's presidential candidates Crowe and President Ruiz were assassinated successively. At that time, the whole of Mexico will become even more panicked, and the whole society will fall into chaos. Even the government that just came to power may be overthrown.

  At this time, the president was already in a state of desperation. His meeting with the senior generals of the National Defense Forces had lasted for seven hours. Later, Mr. President would go to the army to give a speech. Therefore, even if there are huge fluctuations in the foreign exchange market, he can't take care of it at this time.

  As a high-level government official, Otis naturally knows about Chiapas. Hearing what Silva said, he knew that it was impossible to see the president in the near future, so he could only suppress the uneasiness in his heart, and hung up Silva's phone sullenly.

After thinking for a long time in his spacious office, Otis still dialed the phone number of the Minister of Finance. Originally, he did not intend to communicate with the Minister of Finance Antonio immediately, because the two parties have no direct affiliation relationship, and the foreign exchange reserves still have a lot to do. Some discord. But now that the matter is serious, he can only put his face down and explain the changes in the foreign exchange market to the executive as soon as possible, hoping to get support from the Ministry of Finance.

Due to the huge deficit in the current account in the international trade account, in order to maintain the trade balance, the Mexican government must make up from the capital account, and the best way to attract the inflow of dollars is to issue national debt, and the Mexican financial department is responsible for this tool. So far, the total price of U.S. dollar-denominated national debt has reached as much as 30 to 40 billion U.S. dollars, accounting for about half of the total U.S. dollar capital inflows into Mexico.

  This part of foreign exchange reserves is placed in the Bank of Mexico as a liability of the Ministry of Finance. Otis needs to ask the Ministry of Finance for instructions so that the central bank can use some of these funds to maintain the value of the peso in times of crisis.

"Antonio…"

Before Otis could express his intention in the future, Finance Minister Antonio interrupted him, and said in a flat tone: "I already understand what you want to say, but there is no room for negotiation on this matter. In the past few days For months, the Treasury market has been selling more than buying, prices have continued to fall, and the Treasury Department is under great pressure."

Antonio is right. Due to concerns about the political situation in Mexico, many foreign investors have sold their Mexican government bonds in advance. In order to maintain the issued US dollar bonds at a normal price level, the Mexican Ministry of Finance has spent hundreds of millions of dollars. in the bond market.

   Otis knows this, because open market operations cannot be separated from the central bank. He didn't expect that Antonio would use this incident as an excuse. You must know that in addition to investing in other funds, the Ministry of Finance often reserves tens of billions of dollars in the central bank. These funds and the Bank of Mexico's own U.S. dollar funds together constitute Mexico's foreign exchange reserves, which total close to 20 billion U.S. dollars.

However, the Bank of Mexico has recently lent out a lot of US dollar funds, because after the huge amount of exchange in the foreign exchange market, major commercial banks have approached the central bank to exchange a lot of US dollar funds with their pesos instead of using themselves. The U.S. dollar funds in the account are their risk-averse business practices, and the Bank of Mexico has nothing to say about this practice.

  Otis cursed secretly in his heart, knowing that it was impossible for the Ministry of Finance to use their dollar funds under the current circumstances, so he could only discuss the possibility of peso depreciation with Antonio instead.

   "Devaluation? It's very possible!" Antonio's tone remained calm, "We have already discussed the possibility of devaluation internally, and the current foreign exchange reserves should be able to handle it, depending on the magnitude of the depreciation."

  For the depreciation, the attitude of the Ministry of Finance is more welcome, because the dollar funds on hand can be exchanged for more pesos, so that their budget will be more free. Although it will cost more pesos to repay interest on dollar bonds in the future, they can make up for it by issuing new bonds, as long as dollar funds continue to flow into the Mexican market.

  Throughout, they did not consider that the Mexican peso would become a free floating currency due to the devaluation, because the result would be simply disastrous. They may not be able to keep US dollar funds, nor can they keep their current financial income. Because once the peso is liberalized, it will definitely depreciate sharply in the short term. At that time, US dollar funds will flee wildly. The bond market will collapse first, then the stock market, and then interest rates will follow. If it is broken immediately, the fiscal deficit will be very serious. In short, it will fall into a horrible vicious circle.

Antonio does not have an intuitive understanding of the current foreign exchange situation. He simply believes that Mexico's current foreign exchange reserves will continue to support the value of the peso at least for a period of time in the future. The words of depreciation come.

"I'm afraid it's not as simple as you think!" Otis said with a bitter smile, "I suspect that we have been targeted by international hedge funds, and our foreign exchange reserves will be severely impacted in the next two days. As far as I know, There have been huge peso shorts in the IMM market."

   Antonio is not familiar with the derivatives market, but he was keenly aware of the word "more" in Otis's words, and he couldn't help but ask a little strangely: "Why, the foreign exchange market is not calm recently?"

"It's not just calm, it's just a turbulent undercurrent!" Otis coughed lightly, and said bitterly, "The US dollar has been flowing out of net in the past two days, and the amount of money has made us a little dumbfounded. You know, these few There has been an outflow of U.S. dollar funds in the past month, but the amount is not very large, but the net outflow in these two days has exceeded the previous strength, even more than the total outflow in the previous 11 months!"

   "What?" Antonio's heart trembled, and he realized the seriousness of the situation, "Have you reported this to Mr. President?"

"How could there be no report? It's just that the president can't spare the time now. Let's come up with a draft and make a decision when he is free. The time is Monday, the 19th. I don't think it will be long before your secretary will I told you about this. I suggest that we start relevant meetings as soon as possible, conduct preliminary communication first, and come up with a practical plan."

"Is the situation really so serious?" Hearing Otis' seriousness, Antonio couldn't help becoming serious, and after thinking about it, he said, "Then tomorrow morning, I will bring ministerial personnel and associated advisory groups, and our currency experts."

   "Where are there any currency experts?" Otis smiled wryly, and jokingly joked, "Until now, the opinions of experts can no longer change the development of the situation. Moreover, we are currency experts..."

  …

   On Zhongshi’s side, a total of 1 billion U.S. dollars worth of pesos were sold on this day. The pesos in the account now add up to less than 3.5 billion U.S. dollars based on today’s exchange rate.

At this time, the amount of U.S. dollars in the accounts of Skyline Financial Company and Tianyu Fund under the name of Zhongshi reached a staggering 13 billion U.S. dollars. Except for the 4 billion U.S. dollars of its own, the remaining 9 billion U.S. dollars were borrowed. , the daily interest is an extremely astonishing figure. If the peso does not depreciate according to the historically fixed trend, the loss of Zhongshi will reach hundreds of millions of dollars.

  This is only a rough estimate and does not include the loss of exchange rate differences. However, Zhongshi has clearly felt that the Mexican government and the Bank of Mexico have become somewhat unsustainable.

"Mr. Zhong, what should I do tomorrow?" Although the foreign exchange market is a 24/7 market, that is, a market that operates 24 hours a day, 7 days a week, due to the large amount of currency exchange by Zhongshi, except for a few Apart from a large multinational commercial bank, the main counterparty is the Central Bank of the Bank of Mexico, and Bank of Mexico's regular operations must comply with holiday regulations, so Garcia asked this question.

"Exchange them all into US dollars, and they must be exchanged at the close of the market tomorrow. Except for Bank of Mexico, other banks can exchange them. As long as you can find an opponent in the foreign exchange market, you will have worked hard for these two days!" Zhong Shi said firmly , At the end, I also expressed my condolences with a slight apology.

  Although the Bank of Mexico may not always be in the market due to time differences and holidays, there are still commercial banks around the world willing to exchange Mexican pesos, which is why the foreign exchange market is a 24-hour market.

   "Okay!" Garcia nodded without saying anything else. However, in his heart, he was secretly thinking whether to tell the foreign exchange trading department of Chase Bank as soon as possible.

  Looking at Garcia's solemn expression, Zhong Shi couldn't imagine what this rough-looking middle-aged man was thinking. He didn't point it out, because he hoped that Garcia would do this in his heart!

  Once the commercial banks join the wave of runs, the Mexican government can only announce the devaluation of the peso, which will cause panic, trigger a currency crisis, and eventually turn into a financial crisis. All this is exactly what Zhongshi wants, to challenge a country's foreign exchange system with his own strength, and finally knock it down, just like Soros did two years ago!

   Thank you very much for the monthly support of book friends zwhaaa and Molong Zhangui!

  

  

  (end of this chapter)