"Mexico's public debt is in dollars, amounting to $110 million. Even if Morgan takes it all, we still need citizens to buy it. You actually want both of our companies to take it all? That's just crazy," young Rockefeller wiped the sweat from his forehead. When he came to Oak Mansion, he never expected to receive this kind of response when discussing the matter with Sheffield.
So much? Sheffield actually didn't know the exact amount of Mexico's maturing debt. He didn't expect it to be this much. It was indeed too much for both companies to handle, especially since they didn't have enough cash on their side. If they let Standard Oil take this burden, Sheffield wouldn't agree either. Allies needed to balance their interests.
So, Sheffield's knowledge and that of Sheffield United Company in this area were quite limited. He didn't disappoint young Rockefeller's gambling assessment.
Of course, this was just a minor flaw. If they couldn't take it all, they couldn't. Both companies could subscribe to a portion of it and then issue the rest of the bonds to the citizens, as Morgan had done.
Young Rockefeller nodded, feeling that communication with Sheffield could finally continue. "The Morgan father and son's wealth isn't actually that scary. The main issue is that their allies are too powerful. Many citizens almost worship Morgan's financial acumen as if it were a superstition. So, whenever there's an opportunity, they think of Morgan first. You probably don't know how long it will take for your California bank to gain this kind of trust. But you and I represent two companies, so we can also make quite an impact."
Since Sheffield was a financial novice, he listened to young Rockefeller's thoughts attentively and clarified the relationship between Sheffield United Company and Mexico. Because the Mexican government changed almost as frequently as Sheffield changed his underwear, the United Company's connections in Mexico were mainly focused on the states of Coahuila, Chihuahua, Nuevo León, and Tamaulipas, which were close to Texas, and had good relations with local feudal lords.
The relationship on both sides revolved around agriculture, animal husbandry, and mining, with the Rockefeller family previously involved in oil exploration. However, after oil fields were discovered in Texas, young Rockefeller had withdrawn his local exploration team, and Sheffield didn't know if they had returned.
Because of the chaos in the central Mexican government and the ongoing disputes between conservatives and liberals, it was unwise to get directly involved. So, the United Company limited itself to developing relationships with some families in these states.
"I believe we have more connections than the Morgan father and son," young Rockefeller concluded after hearing Sheffield's explanation. It seemed that similar people preferred to be friends with each other. The Sheffield family's connections in Mexico were similar to his family's actions in Texas - avoiding dealings with the central government and establishing direct relationships with local authorities.
"Don't say that. Who doesn't know that I'm as patriotic as anyone?" Sheffield quickly shook his head at young Rockefeller's assessment. "Let's focus on the matter at hand. How do we prepare for this?"
"First, we must ensure that the bonds can be sold and not left in our hands," young Rockefeller said to Sheffield. "Only by making more people profit with you can your influence in the financial industry grow. This is the most basic thing, emotions and connections don't matter. If necessary, I have to be ready to shoot a customer in the head, no matter how much I like them. Once you make the bond buyers lose money, you might be the one getting your head blown off."
It was because of this high risk that young Rockefeller firmly opposed both companies taking all the shares. In the financial industry, nothing was certain, even if it seemed promising.
"First, we should think about how to sell the bonds totaling $110 million. For many citizens, the name 'Mexico' already represents risk, even if you don't think so," young Rockefeller said cautiously.
"I certainly don't think so!" Sheffield replied confidently. After all, Mexico's mining industry was still rich, and collateral could include railways, mining, and even oil. There were nearly twenty million people there, so they wouldn't be unable to repay the money.
Inside Oak Mansion, the two began discussing how to market these bonds. Most citizens of the United States actually had no financial knowledge; they didn't understand anything.
To make the bonds more appealing, both Standard Oil and the United Company were shining, golden brands. But they could also use more straightforward means, like deception.
The current Mexican debt situation is that the Mexican government lacks sufficient hard currency to repay its US dollar debt but can issue more pesos to repay peso debt. This calls for some packaging and a catchy name. "Developing country" sounds better than "underdeveloped country," which in turn sounds better than "backward country." Economic "recession" is worrisome, but "negative growth" sounds much brighter. "Junk bonds" have no takers, but renaming them as "high-yield bonds" can make them fly off the shelves.
"Let's bring Thyssen United Company on board, and then our side will have enough strength," Sheffield mentioned this while discussing the matter. It seemed that in the late 19th century, the German Empire overflowed with capital, and Mexico was a major destination. If German capital could be involved, it would undoubtedly boost market expectations significantly.
Moreover, involving German capital had a huge advantage: sooner or later, Germans and the British would clash, and the overall strength of the Allies was far inferior to that of the Entente. World War I had already been a full-fledged battle for the Germans, and their defeat was inevitable. When that happened, the German capital left in Mexico would be subject to harvesting, and it was better to harvest it themselves than let others do it.
"That sounds like a plan!" Young Rockefeller considered it for a moment. This would further reduce the risk, and with the addition of German capital, the chances of profit would increase significantly.
With the decision made, it just happened that Thyssen United Company had its headquarters in Texas. This matter could be conveyed to the German Thyssen United Company through them. A day later, Thyssen United Company in the Ruhr region responded, expressing great interest in the matter. If Standard Oil and Sheffield United Company joined in, the three parties could discuss this further.
Telegrams buzzed across the Atlantic, spreading the news, no less important than the ongoing Spanish-American War.
The first step was to register a company in Frankfurt, buy Mexican public debt, and then issue two new securities associated with the adjustment bonds through that company. Subscribing to the company's stock. The beneficiaries of this charity could be anyone. The three parties would pay them $12,000 each through mysterious investors. However, what they planned to sell to investors was not stocks but the Mexican bonds held by the new company. To obtain permission to issue bonds, the three parties could once again go through investors, avoiding Morgan's ubiquitous surveillance in the United States financial industry.
The three-party alliance would prearrange a foreign exchange transaction to convert the peso repayment amount of the adjustment bonds into US dollars or marks. Everyone understood this: the three-party alliance would certainly promote the new bonds as dollar bonds rather than Mexican public debt.
As a compromise, a memorandum for the bond transaction added a clause: this credit rating does not reflect the risk of exchange rate fluctuations. With this disclaimer, along with the prominent names of Standard Oil, Sheffield United Company, and Thyssen United Company, Mexican public debt would transform into hot bonds.
Sheffield came up with a catchy name for these bonds, calling them "Emerging Market Bonds." Through a series of telegrams, Young Rockefeller and Sheffield met with representatives of Thyssen United Company, who had come from Texas. During this time, news of almost daily acquisitions of steel companies by the United States Steel Corporation was circulating.
"If we can get His Majesty the Emperor, or even the Prime Minister of Prussia, to say a word about expanding influence in Mexico, I believe the impact will be tremendous," Sheffield coaxed the Thyssen United Company representative. "In today's world, His Majesty the Emperor is the most influential figure, unlike the Queen of England, who is famous but powerless. As long as His Majesty the Emperor expresses approval of German capital entering Mexico, we are almost guaranteed success."
When it came to such schemes, didn't they always gravitate toward authority? Sometimes the presence of academic authority served this purpose. The United States didn't have such conditions; financial industry authority was Morgan. Did Standard Oil and Sheffield United Company go to Morgan, telling them that they were dissatisfied with their actions in the steel industry and were now ready to poach from Mexico?
If the two of them did that, Morgan would probably not hesitate to classify the bonds in their hands as junk. Even if Morgan couldn't get them, they would at least cause trouble for the two companies.
Both Young Rockefeller and Sheffield were looking forward to this. William II, aren't you implementing a world strategy? Both our large companies have brought dinner to the table. As long as you say the word, at least in Mexico, the world strategy will be implemented immediately.
"I need to report this to the head office!" The Thyssen United Company representative didn't directly refuse but stated that he needed time to explain the process to the headquarters. He had seen how it would work, and as long as they executed it properly, the chances of success were high.
"Good!" Young Rockefeller and Sheffield exchanged a glance, indicating their agreement. Sure enough, Thyssen United Company responded quickly, "As long as the bond issuance proceeds, we can try to have the Prime Minister speak for it."
Standard Oil, Sheffield United Company, and Thyssen United Company would each share one-third of the Mexican debt, known as "Emerging Market Bonds." This plan entered the planning stage, and the three parties immediately dispatched joint representatives to Mexico City.
Hello everyone,
If you enjoy reading this novel and want Early Access to 10 New Chapters, then please join my Patreon.
Or Consider donating! at Paypal or Ko-fi.
Your support is greatly appreciated