Risk management and hedging strategy using swaps

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Risk Management and Hedging Strategy Using Swaps:Debt for Equity Swaps:

 A few years back the Government of Japan made the offer to the Government of Brazil:

The Brazilian government will give the "Exclusive rights to all the Minerals/ Metals/ and Mining opportunities in Brazil to a consortium of Japanese Corporations for one hundred years to mine, manufacture, extract and sell the commodities. After the one hundred years the Japanese corporations will vacate and the properties will be transferred to the Brazilian government or its designee. In return for this privilege the Japanese Consortium will retire the "entire external debt" of the Brazilian Government (This was estimated to be $250 billion dollars).

Identify from the perspectives of the Japanese and Brazilian Governments what are the advantages and disadvantages of this proposal. Could this Debt for Equity Swap Work?

Why or Why Not? What are the potential problems?

As a global manager, what strategies should  you adopt to make this work?

Reference no: EM13201200

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