Abstract
In this paper we argue that the relationship between emerging market States, in this case Brazil, and the financial markets is changing due to developments in the area of financial risk management. The use of credit default swaps has ensured that default risk on Brazilian sovereign debt is shared by a large number of market participants. This means that the Brazil State is no longer faced with a homogenous group of investors capable of concerted action. Political risk is still present in the spreads offered by a sovereign debt issuer such as Brazil, but the dilution of the relationship between debt markets and investors means that in the future, financial crisis may be less probable.
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