Growth Participation Units a Proposal for a New Long Term Financial Instrument

Cover Growth Participation Units a Proposal for a New Long Term Financial Instrument
Growth Participation Units a Proposal for a New Long Term Financial Instrument
Tamir Agmon
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If the political risk is associated with political instability, then a guarantee by a presumably unstable government is rather cold comfort. Consequently it is proposed that the CPUs will be guaranteed against political risk under a plan of guarantee swapping.
An example may be the best presentation of the proposed program. Suppose that a financial institution in Ruritania has decided to float an issue of GPUs based on a portfolio of privately placed equity investment in Ruritania. Also assume
...that the government of Ruritania has agreed to guarantee the foreign buyer of the GPUs free convertibility, free repatriation of funds and equal taxation. Suppose that the GPUs are sold on the German, Dutch and Belgian markets. Under the giarantee swapping plan -7^ the Ruritanian government or some agency like the central bank, will negotiate guarantee strapping with say the German, the Dutch and the Belgian central banks. The local institutions will guarantee the local investor in each one of the three markets mentioned and, in return, will receive a similar guarantee from the government, or the bank, of Ruritania.

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