When President Obama and Brazilian President
Rousseff met in 2012, the interest rate on a
one-year U.S. Treasury bill was just 0.2%, while the
interest rate on a comparable one-year Brazilian
government bond was 7.8%. With the gap between
these interest rates so large, it was easy for an investor
to make a high return by borrowing money at the
low U.S. interest rate and investing it at the much
higher Brazilian interest rate. Or was it? Evaluate this
investment strategy.