THE REACTIONS OF LDCs LOAN PRICES TO THE BRADY PLAN

This paper examines the reactions of LDCs loan prices to the debt reduction negotiations under the Brady Plan. The ten countries that have completed restructuring their loans under the Brady initiative reacted differently to the Brady Plan announcements. Loan prices of countries that are expected and are able to immediately take advantages of the debt reduction have reacted positively to the initial Brady Plan announcements. Even though the debt reduction agreements did not lead to significant price gains, most of the countries that restructured their loans under the Brady Plan did eventually return to the capital markets. Hence, from a longer-term perspective, the Brady Plan did help LDCs in restoring their creditworthiness.