632 CHAPTER 16. INTERNATIONAL FIXED-INCOME MARKETS
borrowing in developed markets should be more attractive, for the simple reason
that sophisticated markets are cheaper to operate and its players better informed.
Selectively subsidized loans in the host country could offset that, but the WTO
frowns on practices like that. Interest rates that are capped without discrimination,
in contrast, would be acceptable to theWTO, and still exist in some places. Another
item that could tilt the balance back to the host-country market is the exchange
rate. Controlled exchange rates often imply one-way bets: it is usually obvious
whether the currency is overvalued or the converse. But remember that getting the
timing and size of the adjustment right remains difficult. There is no easy way out,
here. For decisions like this,CFOs will not be replaced by computers any time soon.