Telenovelas

What's wrong with her?

Oh, that's Elena.  She's in a coma.

What happened?

She was in a car accident.  She was in the car with Bruno and they were running from the police.

Why were they running from the police?

Because Bruno had just kidnapped her.

Why did Bruno kidnap her?

Because he is in love with her, and because he wanted a ransom payment from the money she inherited from her engagement to his twin brother Alejandro.

Is that Alejandro?

Yes.

Where is he?

Well, Alejandro was on his way to visit his beloved Elena, because she was about to give birth.  But Bruno poisoned the pilot of Alejandro's private jet and the pilot died mid-flight, and now Alejandro is stranded on a desert island.

Who is he talking to?

That's the spirit of his departed mother.  She is the reason Alejandro is rich.  You see, Bruno and Alejandro were separated at birth; Bruno went off with his father, a very wealthy business man, and Alejandro went to live with his mother in a dirt poor neighborhood in the city Medellin.  The two brothers didn't know of each other's existence until one day they crossed paths.  It was around the time of their father's death, and the will, shockingly, handed down all the father's riches to his wife.  So, Alejandro and his mother suddenly became incredibly rich, and Alejandro was left to run his dead father's businesses.  None of this made Bruno, the heir apparent, very happy.  Not only that, but Bruno's girlfriend, Elena ends up falling in love with Alejandro.

The Algorithm

"Does Standard & Poor take into account the impact of its ratings when assessing a country's credit worthiness?"

"No"
 - Myriam Fernandez de Heredia, S&P's director of sovereign ratings for Europe and Africa, on Los Desayunos de TVE (January 20th, 2012)

The new algorithm would change everything.  The Standard & Poor sovereign credit rating system used a hybrid-form of analysis that combined computerized quantitative modeling with expert qualitative insight.  Everyone understood, however, that the credit ratings themselves, once announced, changed people's behavior and, as a result, altered the equation.  It was a bright young man, a recent MIT graduate, that formulated an algorithm that incorporated the rating's projected impact into the final sovereign credit score.

For example, let us imagine that the credit rating for the sovereign bonds of the Republic of Krakhovia suffer a downgrade due to the country's high debt burden and low growth rate.  The country's S&P rating goes from A to BBB+.  The announcement spooks potential Krakhovian bond buyers; Krakhovia has trouble selling its bonds and must raise the bonds' interest rate; the rise in the interest rate exacerbates the country's already troubling debt levels.  So, the projected debt levels, once the impact of the BBB+ rating is taken into account, are higher than earlier models would have anticipated.  The new algorithm suggests Krakhovia's bond rating be downgraded to BBB.  A BBB rating, however, causes even greater concern than the original downgrade, sending bond interest rates even higher.  The new algorithm suggests Krakhovia's bond rating be downgraded to BB+.  BB+ bonds are borderline junk bonds, alarming bondholders who are increasingly trying to unload the assets.   The algorithm suggest a B- rating.  At B-, the bondholders are sent into a panic, causing a massive sell off and the crashing of the country's currency.  The algorithm suggest a CCC rating.  At CCC, the IMF enters the picture.

The algorithm, once tested, proved unusable because any downgrade (no matter how small) sent the rating spiraling to CCC (the lowest possible rating), and any upgrade resulted in an AAA rating (the highest possible).

The markets were never informed of the algorithm.

Book Review: How to Make a Nicaraguan Quilt

Rigoberto Lopez Perez

On September 21, 1956, Anastasio Somoza Garcia visited the city of Leon to accept his party’s nomination to (once again) stand for reelection in the upcoming Presidential contest. The act was merely a formality; Somoza had already been ruling the country for twenty years and through land expropriations and the personal control of several national industries had become one of the richest men in Nicaragua. Dictators, however, like all leaders, require the appearance of legitimacy, even if it’s through rigged procedure. So, Somoza Garcia made the trip north.

Days earlier, Rigoberto Lopez Perez, a young aspiring poet, landed in Nicaragua, after an ambiguous stint in El Salvador. He immediately headed for his hometown of Leon, carrying a cardboard box filled with his belongings, which included a .38 caliber Smith & Wesson. On the evening of the 21st, he sneaked into a town party thrown in honor of the visiting President. It is said, that when he took out the .38 caliber Smith & Wesson and unloaded it into Anastasio Somoza Garcia, the dictator looked straight at him and remarked (like a father reprimanding his child), “You fool! What have you done?”

Margarita, está  linda la mar by Sergio Ramirez tells the story of this extraordinary event, which led to the death of the first Somoza and the consecration of Lopez Perez as a martyr (you can find his bust next to the cathedral in Leon). As Ramirez retraces the assassin and his victim’s steps up to that fateful party, he flashes back a half-century to tell the story of Ruben Dario, by that point an international literary sensation, and his triumphant return to his hometown of Leon after decades of roaming around the metropolises of the world.

The two narrations mirror each other: as Lopez Perez arrives on a boat to the port-city of Corinto, Dario is also arriving on a boat to Corinto; as Leon throws a parade in honor of Somoza, the city is also throwing a parade in honor of Dario; as Somoza lays dying, Dario lays dying. Even some of the characters are present in both narratives. Dario writes what would become one of his most famous poems, “A Margarita Debayle,” on the side of a little girl’s fan; that little girl grows up to marry Lopez Perez’s victim, Anastasio Somoza Garcia.