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A crucial part of the case came in reducing political risk in Mexico. Since so much labor is involved in copper mining, the Mexican government is not likely to take drastic measures or impose taxes that impede the mining and sale of copper. However, the government might impede cash flows. For example, suppose the Mexican government chooses to tax or otherwise impede interest payments going to the ten banks outside of Mexico in an effort to protect its own loans to Mexican companies. The ten outside banks hedged against such political risk by avoiding cash payments from Mexico. This was accomplished with a purchase contract in which a firm called Sogem in Belgium agreed to purchase nearly 4,000 tons of copper each month at spot rates on the London Mercantile Exchange (LME). Payments, however, went into an escrow account in a New York Bank. These funds, in turn, were used to service $251 million loaned to Mexcobre by ten banks.
The Bank in New York controlling the escrow account acted at the request of the ten lending banks to hedge against copper price movements. Banque Paribus was willing to swap with the escrow fund for variable copper prices and guarantee a fixed monthly price or $2,000 per ton on 4,000 tons per month. The contract with Mexcobre capped the return of the New York Banks to 0.9567% per month. Any excess cash from high copper prices above the capped loan rate were returned to Mexcobre.