By Samuel George of the Bertelsmann Foundation
On February 18 the Republic of Argentina submitted a petition to the US Supreme Court requesting a judicial review of a 2012 decision from the New York Second Circuit Court. That ruling found illegal Argentine payments on restructured sovereign debt if the country did not also service investors who had not accepted the haircut on the non-performing bonds.
If the Second Circuit Court ruling stands, it will set a precedent that holdouts could eventually be paid in full. Bondholders may become increasingly reluctant to accept haircuts on sovereign securities, thus complicating the ability of a distressed country to restructure its debt. Continue reading »
Miguel Galuccio has three principal objectives for 2014: “to produce, produce and produce.”
To help achieve that aim, Galuccio, who has run the Argentine energy company YPF since the government expropriated a 51 per cent share from Spain’s Repsol in 2012, is looking for partners. Continue reading »
By Marcelo Etchebarne Mihanovich of Cabanellas Etchebarne Kelly
Two cases pending in US federal courts show how sovereign and sub-sovereign borrowers in distress can get very different treatment.
Detroit, with declared debts of approximately $18bn, filed for bankruptcy in July 2013. On December 3, it was declared eligible for protection under Chapter 9 of the US Bankruptcy Code. Judge Stephen Rhodes of the US Bankruptcy Court noted that Detroit had negotiated in bad faith with its more than 100,000 creditors; however, he also expressed the view that negotiation was impracticable. Continue reading »
Buenos Aires: good old days
Argentina used to be known as a land of silver. About 100 years ago, its citizens were richer than the average Western European. The country’s name comes from Argentum (Ag), Latin for silver. How then did it become a relatively poor tinpot regime?
It’s a question that the Economist put on its front cover recently, with an editorial that fingered poor governance as the main cause. However, Alan Taylor, an economic historian of Argentina, suggests some different answers in an NBER paper published this week. Continue reading »
Is it the beginning of the end for what enthusiasts like to call “the trial of the century” in the world of sovereign debt restructuring?
Well, perhaps, but there could still be an painfully slow ending to a trial that has dragged on for the best part of a decade, after Argentina filed a petition on Tuesday – right on deadline – seeking a US Supreme Court review of an order to pay $1.33bn to “holdout” bondholders who refused to accept restructured debt after Argentina’s 2001 debt default.
There are now three possible scenarios as to how things could go for Argentina at the Supreme Court. Continue reading »
Eat humble pie? Not a crumb. After lying about inflation for seven years, Buenos Aires last night revealed a new and more credible statistical series. This, said Axel Kicillof, the economy minister (pictured), was not because the old inflation numbers were wrong. Rather, it was because they needed to be updated. Why? Because Argentine consumption habits had changed, he explained. The government’s new inflation numbers, he added, provide “an X-ray of another country.” Continue reading »
Far be it from Latin countries to indulge in some pre-World Cup schadenfreude. Nonetheless, different emerging markets have clearly been affected very differently by the recent bout of market turbulence. Take those distant neighbours, Colombia and Argentina. Two years ago, finance ministry officials in Bogotá threw a cat among the pigeons when they declared that the Colombian economy was larger than Argentina’s, making it the third biggest in the region (after Brazil and Mexico). Buenos Aires quickly harrumphed back: “Not so!” For one, that might only be the case if you converted Argentine nominal GDP into US dollars using black market (and thus illegal) exchange rates, rather than the “true” official one. Continue reading »
You’ve heard of the fragile five – well here’s the desperate duo: Argentina, and Ukraine.
Very different circumstances, but both countries are jumping at desperate measures to keep their currencies afloat. But meddling in the FX market doesn’t always work. Continue reading »
Move over Repsol. The government in Buenos Aires is now directing its stinging verbal attacks at Shell.
After Argentina devalued the peso, consumer prices have begun to rise – a logical consequence. Or not – Cristina Fernández, the president, likened retailers and suppliers that have hiked prices to pilferers on Tuesday night.
And her ministers have taken specific aim at Shell, the oil company also accused by Axel Kicillof, the economy minister, of a “speculative attack” on the peso during its preliminary dive on January 22. Continue reading »
The devaluation is done and the peso has stabilised (for now). But can the government in Buenos Aires prevent another storm from brewing? The signs are not good.
Argentina’s forex reserves are still in freefall. The central bank haemorrhaged roughly 9 per cent of reserves in January to leave it with $28bn, according to Bloomberg. Piling on the pressure, the country’s farmers – even with a weaker peso – refuse to liquidate grain stocks for export. Jorge Capitanich, the cabinet chief who has an eagle eye for “speculative attacks” on the currency, is set to twist their arms later on Monday. Continue reading »
The boss is back – and how they need her.
But wait. Amid economic pandemonium, Cristina Fernández, Argentina’s president, was destined for Cuba on Friday night to meet with regional leaders.
She made her first public appearance in more than a month on Wednesday (pictured), shortly after the peso took a huge tumble. But she failed to broach the subject of the economy in her speech, preferring – as usual – to hit out at her critics in the media and lap up the adoration of her band of young supporters. And things have gotten worse since then. Much worse. Continue reading »
A timely new poll has come our way, commissioned by Graham Fisher & Company for the Emerging Markets Trade Associations, a collection of investors focused on debt. Poliarquía Consultores asked 1,000 Argentinians for their views on the economy, the problems facing the country and president Cristina Fernández de Kirchner.
The three biggest concerns for Argentines are crime, the economy and inflation and voters, the pollsters found, are unhappy with the way the government is tackling them. Continue reading »
What a difference a mountain range makes. To the east of the Andes, Argentina is in the throes of an old fashioned, disorderly devaluation, in which authorities scramble to plug every leaking channel of hard currency flows until at last they are carried off in the flood. To the west, Chile’s authorities are looking on with calm equanimity as their currency gently subsides to its own level.
What is it, other than snow-capped peaks, that unites and separates their two worlds? Continue reading »
Did the Argentine peso’s 10 per cent tumble on Thursday bring it closer to the country’s black market exchange rate? Surely a devaluation of that magnitude would help nudge the official peso rate closer to the black market reality?
Perhaps not. As the following charts show, the official rate is still well off the black market rate – known as the “blue dollar” rate, suggesting further pressure on the official peso to depreciate. Continue reading »
As Argentina’s economy enters crisis mode with the peso crumbling, nobody is watching more closely than the management of Repsol and its shareholders.
On January 29 the Repsol board will meet, as it does on the last Wednesday of every month. On the agenda will be the finer details of a proposal by the Argentinian government to compensate Repsol for having nationalised its controlling stake in Argentina’s biggest oil firm, YPF, in May 2012. Continue reading »