TY - JOUR T1 - The Design and Estimation of a Bi-National Bond to Finance Strategic Infrastructure along the U.S.–Mexico Border JF - The Journal of Structured Finance SP - 71 LP - 88 DO - 10.3905/jsf.2013.19.2.071 VL - 19 IS - 2 AU - Harikumar Sankaran AU - Violeta Díaz AU - Salvador Espinosa Y1 - 2013/07/31 UR - https://pm-research.com/content/19/2/71.abstract N2 - The magnitude of funds needed to improve infrastructure along the U.S.–Mexico border has substantially outstripped the sources, resulting in a deteriorating environment and border security and placing the inhabitants at risk. Traditionally, the federal government in each country allocates a small budget to the North American Development Bank (NADB), a bi-national institution that manages infrastructure development. This article defines a bi-national bond that can be issued by the NADB in U.S. dollars and/or Mexican pesos and estimates the spread for default risk and premiums for the built-in hedge against adverse movements in interest rates and exchange rates. As of May 2012, the authors estimate a B rated, two-year zero, bi-national bond denominated in pesos will yield 9.645% without the hedge and 2.86% with the interest rate and exchange rate hedges. The structured feature of the bond helps in lowering the cost of financing.TOPICS: Project finance, other real assets, legal/regulatory/public policy, emerging ER -