Archive for the ‘ARGENTINE UPDATE’ Category


21 julio, 2015


7 julio, 2015

How I destroyed myself in Argentina

1. I immediately fell for the charms of achamuyero.

Eyes rimmed with ridiculously long, dark eyelashes, matched with charming, easy smiles and a tirade of compliments and attention in smooth Castellano, all boiling down to how I am a gorgeous princess — there’s only so much of an Argentine chamuyero’s tactics a girl who is not a robot can resist.

2. I followed that by drinking too much vino tinto.

If one can get four bottles of decent Malbec for a grand total of less than $10US, why would anyone ever drink water in Argentina?

3. Accompanied by too much carne…

Numerous asados, choripanes, salchichas, chorizos, vacíos, and matambreslater my body was begging me to become a Hindu, worshiping cows and never touching beef again.

4. I didn’t use the dollar blue.

I went into Ezeiza with my VISA card and without a single American dollar in my pocket thinking I would survive by withdrawing money from the ATMs. I ended getting charged 50 pesos by Link or Banelco and another 50 by my own bank for every withdrawal. Bad business for the budget, to say the least. Every transaction cost me the equivalent of two cones of Volta dulce de leche helado.

5. I didn’t bring enough dollars.

So I can pay up to 50% less for a bife de lomo if I exchange dollars to pesos on the black market? I was on the first Buquebus to Colonia, Uruguay and joined the ATM line of Argentinians fortunate enough to have a Miami bank account. I just didn’t withdraw enough and was back to using the pricey cajero a month later…

6. I crossed the border to Chile thinking it might be better there.

I stepped on the bus to Osorno from the bus terminal in Bariloche and passed through pine-filled mountains, went through stunning Villa La Angostura, and didn’t know better than to not get off at that last station before the border. The bus drove up the serpentine road in the Patagonian no-man’s land between the two borders and I finally reached Osorno, Chile with an unimpressed smile on my face. I went running back to Argentina the same day.

7. I became much too acquainted with Fernetand Coke.

I drank way too much of this intensely herb-like cough syrup-tasting alcohol in 2 litre plastic Coca-Cola bottles with their edges softened by lighters and passed around by smiling Cordobeses. Worst part? After a few, they actually begin to taste good.

8. I tried to out-party the porteños.

I mastered the art of siestas at 3 pm, had long dinners on Av. Rodriguez Peña in Recoleta, and drank Coca-Cola to let the caffeine keep me awake until at least 5am. I was still tired by 4 am and went to my morning Spanish class with bags under my eyes hanging down to my feet.

9. I bussed my way from Buenos Aires to El Calafate to save money.

52 hours, ten Adam Sandler movies dubbed into Spanish, and around 9alfajores> later, I arrived. I took the 3-hour flight back.

10. I turned up at the bus station assuming everything would work.

I had my VISA in hand, no pesos, and wanted to get the last bus back from La Cumbre to Retiro, Buenos Aires. The woman behind the glass counter informed me the computer system was down and she couldn’t accept card payment. Three different ATMs, a desperate phone call to my mum, and one stress-induced stomach ache later I was able to board the bus.

Note to self: 24-hour bus strikes, ATMs refusing to spit out money, and system failures are normal things in Argentina. Plan ahead and carry cash.

11. I left thinking my love affair with the country was over.

Yeah, right. This country has a way of destroying people and yet we come running back for more.


Greece   Chronicle of a Default Foretold, Again

James A. Hanson  July 3, 2015


Greece joined the European Union 1981; it was initially rejected by the Euro-Zone but then admitted in 2001.  Some analysts felt Greek accounts were inaccurately reported at the time with the help of foreign banks, more do now.

Admission to the Euro-zone probably reduced interest rates for Greece borrowing, albeit in a hard currency. Investors got Euro-denominated bonds and probably felt the discipline of the Euro-zone would work.  Greece borrowed heavily.

After 2009, Greece underwent a bailout from the EU and an austerity program from the IMF and the Euro-zone. Greece largely defaulted on its privately-held debt, as it had on-and-off in the 20thcentury. As some observers noted, this approach left most of Greece’s debt in the hands of the EU, the European Central Bank, and the IMF; entities that generally do not accept defaults.

Greece has once again been unable to comply with the (externally imposed) austerity plan, although it did manage briefly to generate a small primary fiscal surplus, i.e., excluding interest payments by the government.

Recently, a run started on Greek banks, which led to a) borrowings from the European Central Bank, then b) a cutoff of these funds, and c) last week, Greece’s closure of its banks and imposition of capital controls. Greece was unable to make a payment due to the IMF on June 30. Other countries have gone into arrears with the IMF, but never a developed country. Other countries with arrears to the IMF currently include Zimbabwe, Sudan and Somalia.

What’s next? Greece has decreed a July 5 referendum on the EU proposals for a follow-up austerity program with another bailout. The likely outcome of the referendum is unclear. But a NO, or even a Yes, could well end-up with Greece’s exit from the Euro and a return to its former currency, a new-Drachma.  The currency would depreciate sharply against the Euro, and increase the ratio of external debt to GDP substantially, which already cannot be repaid on time. The increase would depend on whatever reductions are given by the creditors (the IMF will not reduce its loans).  But the depreciation may improve the sales of Greece’s exports of goods and services (mainly tourism and shipping). Export gains were limited under the Euro since austerity did not drive down Greek costs in measured in Euros.

Greek banks also will need some clean-up, since they held Greek government bonds that will be converted to new Drachma. How this conversion affects them will depend on how much bank deposits are written down when converted to Drachma, compared to bonds, and how much debt they will owe to the European Central Bank that is not taken over by the Government.

All in all this looks something like Argentina’s leaving the dollar in 2001. The immediate effect on Argentina was a large drop in GDP, but then Argentina grew substantially from 2003-2007, in a commodity based boom.  Whether anything like a boom in exports of goods and services could occur in Greece, where the main exports of goods and services are services (tourism and shipping), is unclear. Tourism capacity is unlikely to grow much, but raising prices in new-Drachma to the previous level in Euros might yield some increase in incomes from tourism, measured in new-Drachma.


THURSDAY, July 2, 2015






By Paul Byrne

July 1, 2015


BUENOS AIRES, Argentina — As Argentines closely watch the financial turmoil in Greece recalling their own worst crisis 14 years ago, the architect of the South American country’s recovery has a message for the European nation: Renegotiate your debt.


Greece is in a financial limbo now that its bailout program has expired, cutting it off from vital financing and pushing it one step closer to leaving the euro. The country has put limits on cash withdrawals in order to keep banks from collapsing.


Its situation was further worsened Tuesday when it failed to repay a $1.8 billion debt to the International Monetary Fund, the first developed country to do so.


Former Argentine Economy Minister Roberto Lavagna is credited with playing a key role in his country’s recovery after its $100 billion debt default in 2001. He said Tuesday that a “strong restructuring” of its debt is the way to help Greece come out of its crisis and avoid conflict within the European Union.


“It’s not the definitive condition … but it is necessary” to avoid a political conflict, Lavagna told The Associated Press. “Democracy is worth more than markets.”


Lavagna who was economy minister in 2002-05, led Argentina’s recovery from the 2002 recession, considered by many the worst in the country’s history, and spearheaded its 2005 debt restructuring.


Argentina’s financial collapse was so bad that one of every five Argentines was out of work. The peso, which had been tied to the dollar, lost nearly 70 percent of its value, and banks froze deposits and barricaded behind sheet metal as thousands of protesters unsuccessfully tried to withdraw their savings.


Lavagna said the demonstrations in Greece “are way more peaceful” than in Argentina, where at least 27 people died in protests and looting in December 2001 as the economy unraveled. He said that at the time, Argentina also lacked international support and didn’t have the obligations of an economic union like the European Union.





By Rick Noack

July 1, 2015



After Greece defaulted on a payment to the International Monetary Fund on Wednesday, Prime Minister Alexis Tsipras signaled that he may accept bailout terms outlined by the country’s creditors. It’s not the first time that Greece has defaulted on its sovereign debts: In 2012, it did so twice. This time, the repercussions could be much worse as international creditors are unlikely to save the country from being forced to leave the euro zone and return to the Greek drachma.


Nobody really knows the consequences of a “Grexit,” but since 1998, at least 16 sovereign bond issuers have defaulted, according to ratings agency Moody’s. Apart from Greece, there are four other countries that have defaulted twice in the last 17 years: Ecuador, Jamaica, Belize and Argentina.


The Moody’s list only takes into account recently defaulted sovereign bond issuers. Sudan, Somalia and Zimbabwe have been in default to the IMF for several years or decades, as well, and continue to do so. Sudan started defaulting to the IMF in 1984, according to an extensive database collected by the Bank of Canada, which is why it is not included on the map above that focuses on defaults that started after 1998.


Can Greece learn from previous defaults?


A closer look at recent and more historical incidents of states being unable to fulfill their financial obligations reveals that the Greek case is indeed unique.


Argentina is most frequently brought up in discussions on the potential effects of a Greek default. Asked about the lessons for Greece, Domingo Cavallo, who was Argentina’s economics minister when that nation defaulted in 2001, told the BBC: “Defaulting not only on the foreign debts but also on the domestic debts and all foreign contracts at the beginning of 2002 was really a tragedy for Argentina.”


In 2014, Argentina became a defaulted sovereign bond issuer for the second time in only 15 years.  (Reuters)


The default’s repercussions were devastating: More than half of all Argentines lived in poverty in 2003. Inflation and unemployment rose sharply. Despite the dramatic consequences for Argentines, the default appears to have had a limited impact on other economies. “Argentina’s sovereign default in 2001 was then the largest ever, and yet even it did not provoke contagion in global markets,” the Financial Times concluded last year when Argentina faced yet another default.


But Argentina was not part of a currency union such as the euro zone. Furthermore, Greece is geopolitically significant, given its NATO membership and its proximity to the Middle East.


Somewhat less momentous was Russia’s experience in the late 1990s. When oil prices dropped in 1997, Russian exports plummeted and caused a budgetary crisis. Despite an IMF loan, Russia later defaulted on its domestic as well as foreign obligations. It took until 2000 to restructure the Russian debts.


The situation became so dire that Russia had to demand humanitarian aid. Rising oil prices helped the country overcome its crisis soon afterward. Greece, however, only has limited access to valuable natural resources, and its manufacturing sector is weak. Tourism, one of the country’s few reliable revenue streams, would likely suffer from a euro zone exit.


Other countries that have recently defaulted on sovereign debt include Pakistan, Ukraine, Ivory Coast, Moldova, Uruguay, Nicaragua, Grenada, the Dominican Republic, the Seychelles and Cyprus.


That sounds like a lot of defaults, but according to research by the Bank of Canada, the share of total sovereign debt in default out of world public debt or world GDP has sunk since reaching a peak in the 1980s.


Since 1800, Germany has defaulted four times


What appears striking is that some of the countries that have been particularly tough on Greek debts have faced the same fate over the last two centuries. Spain, for instance, has defaulted six times.


And Germany — Europe’s leading economy, which has been especially been keen on enforcing austerity in countries such as Greece, Spain and Portugal — has defaulted four times over the last two centuries. Perhaps their experience proves countries can come back from a default, given time.




By Richard Lough and Nicolás Misculin

July 1, 2015


(Reuters) – For shell-shocked Greeks struggling with temporarily shuttered banks, long lines at ATMs and limits on withdrawals, Argentines who survived similar financial chaos more than a decade ago have some guidance.


“The advice I would give is to go get your money out of the bank,” said Leo Suckewer, a Buenos Aires restaurant operator, recalling Argentina’s “corralito”, or freeze, on bank accounts in late 2001, aimed at halting a run on banks.


That move preceded the decision to abandon pegging the peso to the dollar as well as convert savers’ dollar holdings into local currency. The radical policies plunged millions of Argentines into poverty as the economy contracted violently after three years of steady decline and triggered deadly rioting, the fall of the government and Argentina’s record default on $100 billion of sovereign debt.


But within a year from a sharp devaluation in early 2002 the country returned to economic growth – something that Greece must now crave, with its economy shrinking by more than 25 percent since 2009.


There are striking similarities between the Argentine economic crisis of 2001-2002 and the turmoil in Greece: rigid monetary regimes, creditors battling against domestic politics to fix the problem and banking systems at breaking point.


On Tuesday, German Chancellor Angela Merkel ruled out new negotiations with Greece until after it votes on a bailout proposal by creditors. That left Athens virtually no hope to avert a midnight default, and could set Greece on a path out of the euro.


Some economists argue that Greeks might be better off going back to its old drachma currency as it would allow Athens to spend more freely and point to Argentina’s rapid recovery from the brink of collapse.


Riding an export boom for commodities such as soybeans and spending heavily to fuel consumer demand, Argentina became one of the fastest growing economies in the Americas with growth averaging above 8.5 percent annually between 2003 and 2007.




Yet Roberto Lavagna, Argentina’s economy minister in 2002-2005 and architect of its recovery, said it was too early for Greece to consider ditching the single currency.


“Devaluation is not the central issue today, because it means leaving the euro. I don’t think that is necessary.”


He said, however, that creditors had to accept that Greek debt “had reached a point where it has to be restructured” and that further belt-tightening made no sense.


“Greece cannot afford to be sucked into austerity reforms,” Lavagna told Reuters. “On the contrary, it needs to boost productivity which is what we did back then.”


One thing that Greece does not have is an export cash cow that helped Argentina ride out of its slump.


Domingo Cavallo the former economy minister who imposed Argentina’s “corralito” but lost his job before the peso devaluation a month later, warned Greece against leaving the single currency.


“The exit of Greece from the euro zone … would produce a sharp devaluation of the drachma,” Cavallo wrote in a blog this week. “Inflation would follow and it would generate a sharp reduction of real wages and pensions.”


Cavallo said such a drop would be worse than declines resulting from a negotiated bailout package.




In any case, Greeks may need to brace for more pain.


Argentina spiraled deeper into economic, political and social chaos after its “corralito” was imposed. It was a period that saw five presidents in two weeks. Crowds of young, educated Argentines emigrated to their grandparents’ ancestral homes in Europe.


In 2002, the economy shrank 11 percent.


“The collapse in the financial system was in part a result of the default but also to a large extent because the government was forced to turn dollar deposits into pesos. Many of the banks had negative capital,” said Alejo Costa at investment bank Puente in Buenos Aires.


“And the financial system collapse led to a collapse in production. That will be the biggest concern to Greece.”


To avoid its own banking collapse, Athens needed to persuade creditors to restructure its debt and lower the purchasing power of Greeks by cutting salaries.


“Then you will have deflation and you will regain competitiveness without leaving the euro, without an exchange rate devaluation,” Costa said. “But that is extremely difficult to sell to the public.”


Greek Prime Minister Alexis Tsipras blames German-driven austerity for his country’s economic crisis and has steadfastly refused to meet creditors’ demands for further belt tightening, in particular on pensions, in return for a bailout.


The “corralito” and subsequent devaluation still haunt Argentines, who more than a decade on hold scant faith in the peso. Many express sympathy for the Greeks.


“We were saved by soy,” said Walter Lorenzo, a 57-year-old television studio technician. “What’s going to save them? Fishing?”




By Dimitra DeFotis

July 1, 2015


With successful international bonds issued by the city and province of Buenos Aires as examples, Fitch Ratings thinks local Argentine governments can refinance and issue more debt in the near term.


The Province of Buenos Aires recently issued a $500 million note denominated in dollars due in 2021 that accrues a fixed 9.95% rate, allowing the province to exchange $375.4 million in debt maturing in October. The use: infrastructure projects. And in February, Buenos Aires also issued a $500 million bond under a $2.3 billion medium-term note program, allowing the city to roll over debt that would have matured this year.


Fitch writes that several other provinces are exploring international debt issuance to refinance with longer maturities, while raising funds for infrastructure. But, Fitch adds, many of these issuances are exposed to foreign currency — especially dollars. The caveat, writes Fitch’s Humberto Panti Garza:


“According to the Fiscal Responsibility Law, any debt should be authorized by the sovereign. This may affect the process, due to authorization delays or if the amounts requested are not authorized. Except for San Luis, La Pampa and the CBA, all other state and local governments have adhered to this law. Despite international investor interest, the process could be complex and time consuming, as it requires political negotiations with the sovereign.”


Argentina defaulted on its debt in 2001, leading to a doubling of unemployment, a spike in inflation, and a weak economy that resulted in half of Argentines living in poverty. It restructured most of its debt, but some holdouts didn’t agree to the terms. With a presidential election this fall, however, the issue of “vulture” funds wanting to be made whole following the default and subsequent agreements is on the back burner. For background on Argentina’s debt restructuring, see our free post, “Argentina Bonds: A Bargain In Disguise?” Also see the BBC story, “What Can Greece Learn From Argentina’s Default?” and our free post, “Argentina’s Take On U.S. “Vulture” Bond Investors.”


As for Argentine equities, Petrobras Argentina (PZE) has been the year’s big winner, up nearly 29% in dollar terms, while bank and insurance holding company Grupo Financiero Galicia (GGAL) is up nearly 16%. The Global X MSCI Argentina ETF (ARGT) is up nearly 6% this year.



MONDAY, July 6, 2015

The President Honors the Life of Reverend Clementa Pinckn



July 5, 2015


BUENOS AIRES, Argentina — A Buenos Aires mayoral candidate aligned with Argentina’s top opposition presidential contender has won the first round of city elections.


With 92 percent of election places reporting late Sunday, Horacio Rodriguez Larreta had 45 percent of the vote. Less than 50 percent will mean a runoff in two weeks between Rodriguez and Martin Lousteau, who got 25 percent of the vote.


Larreta, from the Republican Proposal party, is Cabinet chief for Mauricio Macri, the out-going mayor of Buenos Aires who is the top opposition contender for the presidential contest in October.


The results show Macri’s party continues to enjoy wide support in Argentina’s largest city. Macri has been mayor since 2007.


Sunday’s elections included governor and legislator spots in a handful of places across Argentina, including Cordoba.





By Jonathan Gilbert

5 July 2015


BUENOS AIRES — Two Argentine judges whose controversial decision to reduce the sentence of a convicted child abuser provoked widespread anger here have had their resignations accepted, Argentina’s state news agency reported on Saturday.


The judges, Horacio Piombo and Benjamín Sal Llargués, reduced the sentence because they claimed that the 6-year-old victim, a boy, had already displayed homosexual tendencies. They were allowed to step down by Daniel Scioli, the governor of Buenos Aires Province, according to Télam, the news agency.


The revelation of the judges’ ruling infuriated Argentines, especially gay and human rights groups. The federal government’s cabinet chief said it was ”one of the greatest barbarities seen in our country.” The decision by Judges Piombo and Sal Llargués to halve the abuser’s sentence was taken last year in the province’s criminal appeals court, but it only came to light recently.


The sentence of Mario Tolosa, the vice president of a sports club who several years ago had raped the boy, a junior soccer player, was cut from six years to a little more than three. Local news reports said Mr. Tolosa had already been released from prison.


The judges based their ruling on what they said was the boy’s sexual disposition, suggesting that he had homosexual leanings. In a television interview, Judge Piombo also justified the ruling by explaining that previous sexual abuse suffered by the boy at the hands of his father had rendered Mr. Tolosa’s offense less severe. The boy’s family has denied that his father ever sexually abused him. Judges Piombo and Sal Llargués were also fired as university professors after protests by students.


Some politicians had requested that Mr. Scioli, who is also running this year for president, refuse the judges’ resignations so that an impeachment process, propelled by gay rights groups and politicians, could take its course. If the judges were impeached, the politicians argued, they might not have been entitled to pension benefits. After Mr. Scioli’s acceptance, however, the judges will be able to claim the benefits, Télam reported.


The judges had previously faced controversy when they halved the sentence of another convicted child abuser, a pastor, in 2011, paving the way for his immediate release from prison.




By Jorge Otaola

5 July 2015


BUENOS AIRES, July 5 (Reuters) – Argentina’s business-friendly PRO party won Sunday’s mayoral election in the capital Buenos Aires by 20 percentage points, but failed to capture enough votes to avoid a run-off with the No. 2 contender later this month, official returns showed.


With 91.4 percent of the vote counted Horacio Rodríguez Larreta, chief of staff to outgoing mayor and presidential candidate Mauricio Macri, won 45.6 percent of ballots cast.


He needed to break the 50-percent mark to avoid a second round of voting, which will take place July 19.


Still, Larreta’s relatively strong showing was positive for Macri, who will have to carry the city by a wide margin if he is to win the presidency in the October general election. Buenos Aires accounts for about 8 percent of Argentina’s national vote.


“I’d like thank the leader of this team, Mauricio Macri, who we are all sure will be the next president,” Larreta told his supporters in a televised speech.


In second place was Martin Lousteau with 25.6 percent of the vote. The former economy minister represents the ECO party, which is also opposed to outgoing President Cristina Fernandez.


In third place was Mariano Recalde, who heads state-controlled airline Aerolineas Argentinas and represents Fernandez’s Front for Victory party. He got 21.8 percent.


“If there’s a loser here, it’s the Front for Victory, which didn’t even make it to the run-off,” said Ignacio Labaqui, who analyses Argentina for Medley Global Advisors.


Fernandez is constitutionally barred from seeking a third consecutive term in October. For president she has endorsed Buenos Aires Governor Daniel Scioli, who is running several points ahead of Macri in the opinion polls.


Fernandez, widely admired for her political skills but faulted by big business for imposing a web of currency and trade controls that have hurt the economy, may run for president again in 2019.


She backs a slate of congressional candidates in the October general election led by Economy Minister Axel Kicillof and her son, Maximo Kirchner, who heads Fernandez’s “Campora” youth activist organization.


Macri vows he will immediately remove controls and open the economy to attract investment. Scioli also has a more orthodox approach to policy than Fernandez. But any attempts at policy reform could be complicated by the Front for Victory, which is expected to keep control of Congress.




By Hugh Bronstein

July 5, 2015


World markets may tremble at Sunday’s decision by Greek voters to reject conditions of a rescue deal from creditors, but the leader of Argentina, which suffered a similar crisis more than a decade ago, boldly welcomed the referendum result.


President Cristina Fernandez, known for combatively defending her unorthodox policies, tweeted that Greece’s vote marked “a resounding victory for democracy and dignity.”


There are stark similarities between Argentina’s 2002 financial meltdown and the turmoil in Greece: rigid monetary regimes, creditors battling domestic politics to fix the problem and banking systems at breaking point.


In Greece, 61 percent of voters rejected a deal that would have imposed more austerity on their already ravaged economy.


“The Greek people have said ‘NO’ … to the impossible and humiliating conditions that would be imposed for the restructuring of their debt,” she tweeted. “We Argentines know what this is about. We hope that Europe and its leaders understand the message … that you can’t force anyone to sign their own death warrant.”


The South American grains behemoth defaulted on $100 billion in bonds in a 2002 crisis that thrust millions of middle-class Argentines into poverty. By the next year, helped by a massive soy crop, Argentina started growing again.


But the 2002 crisis continues to plague its finances.


Fernandez regularly blasts bondholders who have sued the country over the debt it failed to pay 13 years ago.


Most holders agreed to restructurings that paid about 30 cents on the dollar, while a group of hedge funds sued for full repayment.


The country defaulted again last year when a U.S. judge barred it from honoring its restructured debt without reaching a deal with the funds, which Fernandez denounces as “vultures.”


Argentina became one of the world’s fastest expanding economies after its default, growing at an averaging above 8.5 percent between 2003 and 2007, when Fernandez was first elected.


Since then she has ordered trade and currency controls that have slowed investment while government fiscal accounts deteriorate due to high state spending.




By John Geddie and Marius Zaharia

July 3, 2015


* Most Greek bonds have clauses making restructuring easier

* Investor would need to spend large sums to hold out

* Risks remain as lawyers point to ways around CACs


LONDON, July 3 (Reuters) – Greece might be spared the decade-long legal battles Argentina faced if it ends up restructuring its debt, although lawyers say vulture funds might still hold Athens to ransom.


The structure of Athens’ debt and the use of contract clauses that make it easier for countries to impose losses on bondholders should protect the country from litigious “hold-out” investors, although experts warn they are not fool-proof.


Greece, the first developed country to default on an International Monetary Fund loan, has seen the value of its bonds collapse on fears it is headed for a repeat of 2012, when it wrote down its debt. Greeks will vote on Sunday in a referendum that could ultimately see it leave the euro zone.


But brokers say there are no signs yet of distressed debt investors that prey on bankrupt countries – and have hauled the likes of Argentina through the courts – hovering over Greece.


“There is a small risk that there could be holdout law suits, but nothing like Argentina,” said Starla Griffin of Slaney Advisors, a lawyer and member of the Expert Group on Sovereign Debt Restructuring sponsored by the United Nations.


Argentina, whose debt was not protected by such clauses when it defaulted in 2002, is still in a legal battle with holdouts, including Elliott Management’s affiliate, NML Capital Ltd, and Aurelius Capital Management.




Investors aiming to stay out of any further Greek debt writedown and get more of their money back would first have to thwart collective action clauses (CACs). Those clauses are written into about 33 billion euros of Greek bonds issued in 2012 as part of the restructuring and into around 6 billion euros of 2017 and 2019 bonds issued last year.


The former – handed to investors in a process called Private Sector Involvement in exchange for older bonds – are even better protected, because they are treated as one series.


For a debt restructuring to be enforced on all those bonds, investors holding at least two-thirds of the outstanding bonds need to vote, and 75 percent of those voting need to back it.


That means holdouts would have to build a stake of some 5.5 billion euros across all the bonds, rather than a smaller stake in only one of them, to have a chance of success.


“For a significant amendment to the terms of the PSI notes, the quorum will be two-thirds, but with 25 percent you can block any proposal of this type, given that they require 75 per cent approval to pass,” said Arjun Muddu, an associate at Linklaters, who acted for banks mediating the 2012 restructuring.


Japonica Partners says it is one of the largest holders of Greek government debt, and launched a tender to buy up to 4 billion euros of these bonds in 2013. If Greek bond prices fall further, the firm might be able to build a blocking stake. Reuters has not been able to confirm Japonica holdings of Greek debt in conversations with traders and other investors or on bond databases.


The two Greek bonds issued in 2014 also have CACs, but they are different. They allow for a vote on each bond, meaning investors need less money to build a blocking stake.


After a U.S. court ruling that forced Argentina into another default last year, the IMF called for CACs to require only a single vote across all affected bonds rather than multiple votes on each one. A single vote would make it easier to impose a writedown.


That approach has been endorsed in Europe by the International Capital Markets Association, but it may have come too late for Greece.


“The two-limbed requirement makes life for holdouts more difficult, but CACs are not watertight and in theory holdouts can still block a restructuring with a large and diverse majority,” said Dania Thomas, business law lecturer at Glasgow University.


There is precedent in Greece for holdouts. Athens still has around 4 billion euros of old, unrestructured bonds, but has so far honoured payments on such debt and avoided court action.





But even if investors are pushed into future haircuts, the legal battles may not be over.


Christian Leathley, an international arbitration lawyer at Herbert Smith Freehills, said that if investors could not get a blocking stake in any future restructuring, they might still be able to pursue a claim against the sovereign under an applicable bilateral investment treaty.


Herbert Smith Freehills pursued bondholder claims arising out of Argentina in U.S. court enforcement actions.


“Even though under the bond you were basically strong-armed into accepting this arrangement, that might not necessarily preclude you from bringing a claim under a treaty,” said Leathley.


“No matter what the best intention is … there could be some quite lengthy litigation that follows through these international arbitral tribunals.”


Greece has signed around 40 such treaties with other countries, including Germany, according to the United Nations.





By Charlie Devereux

July 5, 2015


Opposition presidential hopeful Mauricio Macri saw his candidate win by a comfortable margin in elections for mayor of Buenos Aires, while failing to avoid a run-off.


Horacio Rodriguez Larreta of Macri’s PRO party had 45.6 percent of votes against 25.6 percent for the ECO alliance’s Martin Lousteau and 21.8 percent for Mariano Recalde of the national government’s Victory Front alliance with 92 percent of votes counted, according to the city government. Lousteau said he would compete in a second round, scheduled to take place on July 19, since Larreta failed to gain a majority.


Macri, mayor of the city for two four-year terms, described the election as a plebiscite on his presidential bid as he seeks to end 12 years of government by President Cristina Fernandez de Kirchner and her late husband Nestor Kirchner. The question now is whether Lousteau can attract enough of the votes cast for Fernandez’s Victory Front alliance to overcome Larreta’s 20-point margin.


“This is a clear message of confidence in what we’ve been doing,” Macri said in a speech to supporters after results were announced. “This is part of something much bigger that’s happening in all of the country.”


Lousteau, whose alliance includes members of the Radical Party and the Civic Coalition that is allied with Macri at a national level, denied suggestions by the PRO party that he might decline to contest a run-off.

“Today the residents of Buenos Aires decided that there will be a run-off,” Lousteau told supporters.


“With a run-off, we all win.”

Elections also took place Sunday in Cordoba province, Argentina’s second-largest voting district, and La Rioja province, where not enough votes had been counted to declare a winner. Corrientes province voted for provincial lawmakers and senators while La Pampa province held primaries to choose candidates for governor.





By Charlie Devereux

July 2, 2015


Shows voter support for top three candidates using average of various national polls


Argentina’s presidential elections in October will be the first in 12 years that won’t feature President Cristina Fernandez de Kirchner or her late husband Nestor Kirchner as candidate.


* March 15: Radical Civic Union votes to form alliance with main opposition candidate Mauricio Macri


* June 9: Dissident Peronist candidate Sergio Massa says he’ll remain in race and won’t form alliance with Macri


* June 16: Daniel Scioli names Fernandez ally Carlos Zannini as his vice presidential running mate. Stocks, bonds and black market peso tumble on speculation appointment means currency controls and subsidies will be kept in place


* June 20: President Fernandez says she won’t put herself forward for elected office; her son, Maximo Kirchner, will run for lawmaker in Santa Cruz, while Economy Minister Axel Kicillof will stand in city of Buenos Aires


* July 5: Regional election in Buenos Aires where Macri’s candidate Horacio Rodriguez Larreta must see off challenge from former Economy Minister Martin Lousteau. Cordoba, La Rioja and Corrientes provinces also hold elections


* July 10: Official start of campaigning for primaries


* July 19: Possible second round vote for Buenos Aires elections


* Aug. 9: Primaries to choose candidates for president. Candidates for governor, lawmaker and senators for some provinces also chosen **Scioli to run uncontested as ruling FpV alliance candidate **Macri to compete with Ernesto Sanz, Elisa Carrio **Massa to compete with Jose Manuel De la Sota


* Sept. 20: Official start of general election campaign


* Oct. 25: Presidential election. Provinces of Jujuy, Formosa, Catamarca, Misiones, San Juan, San Luis, Entre Rios, Buenos Aires, La Pampa, Chubut and Santa Cruz also hold regional elections **Candidate must win more than 45% or more than 40% with 10ppt margin of victory over rival to avoid second round


* Nov. 22: Possible second round of presidential elections


* Dec. 10: New president sworn in




By Katia Porzecanski

July 2, 2015


A creditor group led by Owl Creek Asset Management is on the cusp of controlling enough defaulted Argentine bonds to demand immediate repayment, according to people familiar with the matter.


Jeffrey Altman’s $4.1 billion hedge fund is working with law firm Jones Day to find other holders of the $5.4 billion in so-called par bonds that want to join the group, according to the people, who asked not to be identified because the talks are private. The investors, who need at least 25 percent of a series of notes in order to demand their money right away in a process known as acceleration, are close to reaching that level for one of the bonds, the people said.


Owl Creek first sought to form the group last year after starting its Argentina Recovery Fund in September. The effort initially gained little traction on concern it would protract a legal battle and derail chances of a quick settlement between Argentina and creditors from its 2001 default led by Elliott Management, whose lawsuit has blocked payments on restructured bonds since June 2014.


Patrick Clifford, a spokesman for New York-based Owl Creek at Abernathy Macgregor Group, declined to comment on acceleration efforts. Dave Petrou, a spokesman for Jones Day, didn’t return an e-mail and phone call seeking comment. A press official for Argentina’s economy ministry declined to comment.


Windfall Profit

In an August presentation for its Argentina-focused fund, Owl Creek said accelerating the par bonds, which mature in 2038 and are the lowest-priced of the restructured bonds, could provide investors with a windfall profit in a subsequent bond swap. The bonds traded at 53.88 cents on the dollar on July 2.


The hedge fund said in its August presentation that accelerating may provide them with a “seat in settlement negotiations” next to Elliott, “likely resulting in an exchange into new bonds which trade closer to par.”


The Argentina Recovery Fund helped lead Owl Creek’s gains through the first quarter of 2015 with an 8.6 percent return over the period, people familiar with the matter said in April. Its main Owl Creek Overseas Fund rose 3.7 percent through March.


Owl Creek opened a second Argentina Recovery Fund in December and a third in June, according to U.S. regulatory filings.




By Bridgett Weaver, Greeley Tribune, Colo.

5 July 2015


July 05–Imports of fresh beef will be allowed from northern Argentina and 14 Brazilian states following a final ruling by the U.S. Department of Agriculture’s Animal and Plant Health Inspection Service.


Imports of certain animals and animal products from the areas have been blocked until now to prevent the introduction of diseases to U.S. production, according to Docket No. APHIS-2009-0017, which detailed the case.


The regulations are being amended after a recent risk assessment determined that fresh beef, which means chilled or frozen beef, can be safely imported from areas that meet certain conditions.


Northern Argentina meets the conditions, as well as the Brazilian states of Bahia, Distrito Federal, Espírito Santo, Goiás, Mato Grosso, Mato Grosso do Sul, Minas Gerais, Paraná, Rio Grande do Sul, Rio de Janeiro, Rond”nia, São Paulo, Sergipe and Tocantins.


The ruling comes after many years of trade barriers put up between the regions in question and the U.S., which means the imports are not likely to flood the U.S. market.


“All the infrastructure and that supply chain is going to have to be put into place,” said Brett Boydston, vice president of public policy with the Colorado Farm Bureau.


Boydston said he thinks the ruling is a positive one. It could act as a peace offering between the U.S. and other countries putting up such trade barriers.


“I think an olive branch is a good way to put it,” Boydston said. “I think it sends a big message that when it comes to considerations like this we’re going to use sound science methods to tear down trade barriers.”


Most important, Boydston noted, is that if the U.S. is taking down these barriers, it will prompt other countries to take down similar barriers that are being used against the U.S.


Some producers are concerned that opening trade between the countries will expose U.S. herds to Foot and Mouth Disease, more commonly known as FMD. It is a highly contagious viral disease that affects cattle and sheep. It causes ulcers on the hoofs and around the mouth of the livestock.


The documents cited 870 comments on the allowance of imports.


“Many commentors, citing the highly contagious nature of FMD, expressed the view that we should not allow fresh beef to be imported from any country where the disease is present because regionalization is not likely to mitigate the risks associated with imports effectively. We considered the epidemiological characteristics of FMD,” documents said. “Based on our assessment, we concluded that beef from the exporting region of Brazil could safely be imported into the United States, provided that FMD has not been diagnosed in that region within the past 12 months, that there is no commingling of bovines or beef from that region with animals or beef from other regions…”


Keith Roehr, state veterinarian with the Colorado Department of Agriculture, said he doesn’t think the USDA would put cattle in harm’s way, but there is a lot of opposition to opening the U.S. to these beef imports, including a statement from the National Cattlemen’s Beef Association president stating the organization’s concerns.


“NCBA remains committed to supporting open trade markets, level playing fields, and utilizing science-based standards to facilitate international trade,” according to a statement by the Association. “At the same time, no amount of trade is worth sacrificing the health and safety of the United States cattle herd.”


Roehr said he supports the NCBA’s statement, but he hasn’t actually read the risk assessment and cannot speak to the science behind the agriculture department’s decision.


“I think in the end I would feel the USDA has done what they can,” he said. “In the end, we know the risk is probably pretty small but we know the outcomes of these things is huge.”


He said the risk of introducing FMD in the U.S. is what is concerning to producers.


“We have a disease-free status that other countries don’t.”


JBS USA CEO Andre Nogueira said in a recent meeting with the press he does not understand companies that support the open market when it comes to exports, but not when it comes to imports.


“We love the open market. The open market brings efficiencies. So we cannot believe in an open market when we sell and not believe in an open market when we buy. The open market is the open market,” he said.


Nogueira, who comes from Brazil, said Brazil has a very high standard of beef production and works with some of the most selective global markets.


Bill Rupp, president of JBS USA Beef, said the open market also benefits U.S. consumers when domestic supplies are tight.


“With the drought and the impact of the drought on the cattle herd, we’ve seen the supply of mature cows, which is by and large the foundation of our ground beef supply, those cows were liquidated because of the drought,” Rupp said. “That has been totally compensated for by the input of lean trimming from Australia and New Zealand. The poundage that was lost in the U.S. has been completely offset by fresh, frozen trimmings from Australia and New Zealand.”


Rupp called these imports and example of the marketplace working efficiently, emphasizing that foreign meat supplies play an important role in the U.S. food system.




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4 julio, 2015

ARGENTINE UPDATE – Jun 26 & 29, 2015

29 junio, 2015

Countries, Human Rights Abuses in US Report

A woman reacts as she rests from walking back to Tel Abyad town, Raqqa governorate, after fleeing Maskana town in the Aleppo countryside June 16, 2015. With a string of victories over Islamic State, Syria's Kurds are proving themselves an ever more depend
A woman reacts as she rests from walking back to Tel Abyad town, Raqqa governorate, after fleeing Maskana town in the Aleppo countryside June 16, 2015. With a string of victories over Islamic State, 


Middle East
Syria: Massacres by government and allied militias, civilian neighborhoods bombarded, prisoner abuse, rape as a weapon of war; attacks on residential areas; creating some 3.2 million refugees and another 7.6 million internally displaced; widespread torture, forced displacement and starvation; increased human trafficking, child soldiers,; similar abuses by terror groups; 900 members of a single tribe executed by Islamic State; group also stoned women and men accused of adultery, crucified civilians, forced people into marriages, raped kidnapped girls, kept women in sexual slavery, beheaded foreign journalists and aid workers, and circulated videos of their crimes on social media.

Iraq: The Islamic State group killed, raped and recruited child soldiers and targeted Shiites; abuses by Shiite militias operating outside government control, including kidnappings, extortion, killings; limits on freedom of expression and peaceful assembly; violence against journalists; restrictions on religious freedom; widespread corruption. More than 2 million displaced during the year.

Saudi Arabia: Human rights activists tried as terrorist suspects; individual executed for “sorcery;” limited religious freedom; restricted women’s rights; activists sentenced to lashes.

Egypt: Excessive force by security and suppression of liberties; little government investigation of abuses; mass trials; expanded jurisdiction of military courts to try civilians; lengthy pre-trial detentions; thousands of protesters arrested, including secular and Islamist activists.

Israel: Civilians targeted by terrorists; religious motivated “societal violence;” institutional discrimination against Arabs, including self-identified Palestinians and Bedouins; unequal access to education, employment; treatment of refugees and migrants; discrimination against non-Orthodox Jews, minority religions, intermarried families.

Bahrain: Protesters arrested on vague charges, tortured; trials of political and human rights activists, students and journalists without due process, resulting in harsh sentences; discrimination against Shiites.

China: Routine repression of rights advocates, minorities and law firms taking sensitive cases; censorship and tight control of Internet; restrictions on freedom of religion; tens of thousands of political prisoners; prosecution of individuals trying to fight corruption and abuses of power; poor labor standards.

North Korea: A human rights record “among the worst in the world;” systematic violations by government, institutions and officials, including crimes against humanity; public executions, disappearances, arbitrary arrests, torture and severe punishment for refugees returning home; “inhuman” prison camps and forced labor.

Myanmar: Violence and discrimination against Rohingya Muslims; unfair citizenship rules; Muslims displaced by violence, restricted in movements, receiving little help to return to homes; killings, arbitrary detentions and torture by security forces; lack of rule and widespread rape in conflict areas.

Pakistan: Extrajudicial killings; harassment of journalists and high-profile attacks on them; limited freedom of religion for minorities; disappearances, torture and frequent mob and sectarian violence; corruption within police; rape, domestic violence, “honor crimes,” discrimination against women and girls; “widespread” human trafficking, child abuse, sexual exploitation; most of nation not covered by labor rules; human rights abuses go unpunished.

Afghanistan: Widespread atrocities by insurgents, including torture, targeted violence against women and girls; extrajudicial killings, arbitrary arrests and prisoner abuse by security forces; women detained for “moral” crimes, subjected to underage and forced marriages; abuses by officials unprosecuted.

Nigeria: More than 4,000 civilians and tens of thousands displaced by Boko Haram attacks; response hampered by high levels of corruption in Nigeria’s military; impunity for abuses, corruption throughout government; violence against women, sexual exploitation of children; discrimination against women and homosexuals based on ethnicity, religion, region, disabilities; forced and bonded labor.

Sudan: Indiscriminate and deliberate bombing of civilian areas in Darfur; attacks on humanitarian facilities; clashes between government forces, militias, rebels resulting in deaths on all sides; civilian areas shelled by armed opposition, too; opposition, civil society members arrested.

South Sudan: 10,000 children used as fighters in civil war; more than 1.5 people displaced in “one of the world’s worst humanitarian disasters’” ethnically targeted killings, rapes by both sides; journalists, political opponents intimidated; U.N. staff and NGOs restricted in movements, harassed; widespread violence against women and children; pervasive corruption, impunity.

Russia: Increasingly authoritarian system; new repressive laws to stop dissent and harass activists, media and other independent voices; in Crimea, members of Tatar community and other religious minorities opposing occupation persecuted; in eastern Ukraine, Russian forces and allied separatists shelled urban areas and committed abductions; widespread corruption throughout all levels of government.

Turkey: Weak justice system, politicized law enforcement, prosecutors suspended for investigating corruption of government officials, evidence destroyed; few prosecutions for excessive force leading to deaths of demonstrators; journalists jailed; individuals vilified for political, religious, cultural views; discrimination against Kurds, Roma, women, children, homosexuals; honor killings, child marriage; poor prison conditions; rise in anti-Semitism among political leaders and pro-government media.

Latin America
Venezuela: Crackdown on protesters, including detentions, torture, imprisonment; opposition figures jailed, media blocked, journalists harassed and intimidated through fines, property seizures, criminal investigations; political opponents prosecuted, harassed, intimidated, imprisoned.






5. ARGENTINA: CURRENCY FORECAST (Economist Intelligence Unit – ViewsWire)
June 25, 2015

BUENOS AIRES, Argentina –  Argentina’s highest criminal court has rejected attempts by the country’s vice president to throw out a bribery case against him.

The Federal Chamber of Criminal Appeals on Thursday confirmed the case against Vice President Amando Boudou. The decision will send Boudou’s case to trial, which would likely be scheduled for next year.

While heading the Economy Ministry in 2010, Boudou allegedly instructed the South American nation’s tax bureau to give the Ciccone printing house an exceptional moratorium to refinance debts amid a bankruptcy.

Boudou has said that he is innocent and that he is being persecuted by political opponents. He has continued in his post, but is not running for any office during the national elections in October.

By James B. Stewart
June 25, 2015

There may be a one-word explanation for why Greece will ultimately capitulate to European demands for more austerity:


Greece is hardly the first nation to face the prospect of defaulting on its sovereign debt obligations. Argentina has defaulted on its external debt no fewer than seven times since gaining independence in 1816, most recently last year. But it’s Argentina’s 2001 default on nearly $100 billion in sovereign debt, the largest at the time, that poses a cautionary example for Greece.

Should Greece default, “Argentina is an apt analogy,” said Arturo C. Porzecanski, a specialist in international finance at American University and author of numerous papers on Argentina’s default. But for Greece, “It would likely be worse. Argentina was comparatively lucky.”

Daniel Gros, director of the Center for European Policy Studies in Brussels and the author of “A Tale of Two Defaults,” a paper comparing Greece and Argentina, agreed. “Default would be much worse for Greece than it was for Argentina,” he said.

Like Greece today, Argentina had endured several years of hardship and austerity by 2001. It borrowed heavily from the International Monetary Fund, the World Bank and the United States, all of which demanded unpopular spending cuts. The I.M.F. withheld payments when Argentina (like Greece) failed to meet its deficit targets. A bank run led the government to freeze deposits, which set off riots and street demonstrations. There were deadly confrontations between police and demonstrators in the heart of Buenos Aires, and the president at the time, Fernando de la Rúa, fled the country by helicopter in December. In the last week of 2001, Argentina defaulted on $93 billion in sovereign debt and subsequently sharply devalued the peso, which had been pegged to the dollar.

In addition to social unrest and a wave of political instability (at one point, the country had three presidents in four days), Argentina’s economy plunged into depression. Tens of thousands of the unemployed scavenged the streets collecting cardboard, an enduring image that gave rise to the term “cartoneros.” Dollar-denominated deposits were converted to pesos, wiping out over half their purchasing power.

Despite this trauma, the Argentine economy stabilized in 2002. The country was able to repay the I.M.F. in full by 2006. But the country has never re-entered the international debt markets. It has refused to comply with a ruling by a United States federal court judge that the country must repay in full private creditors who did not participate in the country’s debt restructuring. As a result, Argentina defaulted again last year, and the standoff continues.

Even without much external financing, Argentina’s economy has fared relatively well since 2002, leading some economists, notably Mark Weisbrot of the Center for Economic and Policy Research in Washington, to suggest that Greece should default, suffer the short-term pain and follow Argentina’s example.

But even Yanis Varoufakis, Greece’s firebrand finance minister who advocates standing up to the European Union’s demands, said the idea that Greece could default and emulate Argentina was “profoundly wrong,” as he put it in a recent blog post — a point he reiterated when we spoke a few weeks ago.

Argentina’s economic recovery was largely driven by a fortuitously timed surge in commodity exports driven by demand from fast-growing Brazil and China. (Although the commodity boom is long over, and Argentina’s economy today is at best stagnating, those two countries still account for about 28 percent.) Soybean meal, corn and soybean oil are the country’s top three exports. Argentina had a population of over 41 million and gross domestic product of $610 billion in 2013. Although it’s a net importer of energy, it has vast shale oil and gas reserves that could make it self-sufficient.

Greece, by contrast, is heavily dependent on imports. Its top three are crude oil, refined petroleum and pharmaceuticals, all necessities. While its top export is also refined petroleum, it has to import crude oil for its refineries. Its only major homegrown exports are fresh fish and cotton. It would be hard to significantly increase sales of either product: The European Union has strict quotas to prevent overfishing, while cotton production is struggling from reduced demand for textiles and a lack of bank financing.

“Idle productive resources in Greece cannot produce much for which there is increasing demand,” Mr. Varoufakis wrote.

Mr. Gros noted, “Greece doesn’t export much.” If the country left the European Union and brought back a sharply devalued drachma, “They’d gain some from tourism,” he said. “But they’ve already cut prices and tourism has gone up. But it hasn’t really helped because total revenue hasn’t gone up.”

And compared with Argentina, Greece is tiny, with a population of just over 11 million and gross domestic product of $242 billion in 2013. “Argentina is a resource-rich country that, if forced to, can live with its own resources,” Mr. Porzecanski said. “The economic viability of Greece on its own has never been tested” since 1981, when Greece joined the European Union.

Everyone pretty much agrees that, if Greece could devalue its currency, as did Argentina, its economy would benefit. But it was also relatively easy for Argentina to devalue the peso by severing its link to the United States dollar, a tie that was self-imposed. As Mr. Varoufakis put it, Greece doesn’t have a currency that’s pegged to the euro: “It has the euro.” The practical challenge of disseminating a new currency would be enormous. Moreover, Greek savings now denominated in euros (and, in many cases, deposited in European banks outside Greece) can’t be converted to drachmas, as the Argentines converted savings into pesos.

Converting to the drachma would also be a crushing blow to the private sector, much of which finances its activities with euro-denominated loans from non-Greek banks. “They wouldn’t be able to service the debt with devalued drachmas,” Mr. Porzecanski said. Nor would Greek courts have the final say in any ensuing litigation.

In Argentina, “the government ruled that a corporation or bank that owed debts denominated in dollars were payable in pesos at a one-to-one exchange rate,” Mr. Porzecanski said. “They could do that with internal debt. But Greek companies have a lot of cross-border obligations. The European Central Bank has kept Greek banks alive. Its collateral would be worth only a small fraction if Greece leaves the euro. The Greek banks would be insolvent immediately.”

In sum, he said, “It would be a royal mess.”

But as game theorists point out, there’s no guarantee a rational outcome will prevail.

After surging early this week on optimism that Greece had come forward with a workable proposal, markets gyrated on concerns that it still didn’t go far enough to satisfy Greece’s major creditors. And Mr. Varoufakis, while conceding that leaving the euro would be a disaster, still contends a Greek default would be manageable and give Greece more leverage in longer-term negotiations to keep Greece in the European Union and eurozone.

No matter how much worse it might be for Greece than Argentina, “the outcome will ultimately be determined by politics, not economics,” Mr. Gros said. “Economists are terrible at predicting political outcomes.”

Mr. Porzecanski put it another way: “Do the Greek people know they’re playing with fire and might get burnt? It’s what they voted for, and they seem to have voted with their eyes wide open. Not everyone values prosperity the same way” as people in the United States and most of Europe do.

For others, which evidently includes many Greeks, ceding national sovereignty to foreign lenders may be worse than economic chaos. As Mr. Varoufakis wrote, “I salute the Argentinian people for having toppled a regime, and more than one government, that tried so desperately to sacrifice a proud people on the altar of I.M.F.-led austerity.”

People in countries like Venezuela and Cuba have tolerated failed economies and low standards of living for years, and the Russians seem all too willing to follow President Vladimir Putin into recession. “Populism and nationalism,” Mr. Porzecanski said, “are still potent forces.”
By Amanda Billner and Niklas Magnusson
June 25, 2015

The biggest bank in the Baltic region criticized Paul Krugman for comparing Latvia with Argentina at the height of the global financial crisis in 2008.

The Nobel laureate’s predictions failed to take a number of key differences between the two countries into account, including its membership in the European Union and NATO, as well as its debt laws, Swedbank AB Chief Executive Officer Michael Wolf said.

“The analysis was appallingly poor,” Wolf said in an interview in Stockholm earlier this month.

Krugman’s comments in late 2008 did a lot of damage, because they “influenced the whole sentiment,” according to Wolf. He became CEO a few months later, when the Swedish bank was struggling to stem losses brought on by a credit-fueled housing bubble in the former Soviet region.

“Perception can be created by people like Paul Krugman,” Wolf said. “That makes the less informed part of the population make the wrong decisions.”

Krugman didn’t respond to an e-mailed request sent June 24 seeking comment.

In opinion pieces published in the New York Times in December 2008, Krugman said Latvia was the new Argentina, comparing the Baltic nation’s economic crisis with the South American country, which defaulted in 2001.

“The most acute problems are on Europe’s periphery, where many smaller economies are experiencing crises strongly reminiscent of past crises in Latin America and Asia: Latvia is the new Argentina; Ukraine is the new Indonesia,” he wrote.

IMF Bailout
Latvia applied for a bailout from the International Monetary Fund and the EU in 2008 after its second-biggest bank collapsed when its housing bubble burst. The events triggered a recession that culminated in Latvian gross domestic product contracting 14 percent in 2009.

Latvia resisted calls from economists including Nouriel Roubini and Krugman to abandon its currency peg. It opted instead for austerity measures totaling more than 11 percent of GDP in 2009, an unprecedented adjustment in a single year, according to the IMF.

Latvia’s budget cuts during the darkest hours of the financial crisis “saved” its Baltic neighbors, Andrius Kubilius, who was the prime minister of neighboring Lithuania at the time, said in 2010.

Wolf said Swedbank dealt with the panic surrounding the Baltic crisis by publishing stress test results. “At least when we said something, you’d get data that was there for everyone to look at,” he said. “Step by step, we were able to change the picture.”

There’s no question Latvia was in “a very difficult situation,” Wolf said. But its determination to become an integrated member of the EU, and subsequently the euro zone, “is something that you can’t put into Paul Krugman’s models,” he said.

Latvia never defaulted, and has enjoyed seven consecutive quarters of economic growth. Its unemployment rate was 8.6 percent in May, compared with a high of more than 17 percent in March 2010.

It’s not the first time a high-ranking Swede has criticized Krugman. Riksbank Deputy Governor Per Jansson faulted the Nobel laureate for being way off in his characterization of the Swedish central bank as a “sadomonetarist” institution. Krugman has argued the Riksbank’s crisis policies were too tight given the outlook for inflation and unemployment. The Riksbank has responded that the data show a more nuanced picture, given an overheated housing market and strong economic growth.
By Linette Lopez
June 25, 2015

It’s almost silly that we thought it would be so easy.

Argentina watchers hoping that the country would repay its debts and come out of default once Cristina Fernandez de Kirchner left the presidency in 2016 just had their hopes dashed.

Buenos Aires Gov. Daniel Scioli, Fernandez’s chosen successor and frontrunner in this year’s presidential election, lashed out at opposition politicians in a speech on Wednesday.

He nailed them for seeking to pay the “vulture funds,” a group of hedge funds that bought Argentine debt for cents on the dollar after it defaulted in 2001.

The lawsuit that the hedge funds brought — because Argentina’s government refused to pay them — pushed the country into default last year, but no one in the ruling party seems to mind anymore.

“Just a few hours ago, they said that we needed to run out and pay the vulture funds,” Scioli said.

He added that supporting payment would lead to more debt and destruction for the Argentine economy.

So yeah, it doesn’t sound like he wants to pay anyone.

Argentina has been refusing to pay these hedge funds, known collectively as NML, since then. Its intransigence has become an ideological issue for the government; and unfortunately it’s also one that has made Argentina a pariah of international markets and kicked it into default last summer.

Another sign? Scioli chose Fernandez’s legal secretary, Carlos Zannini, as his running mate. Zannini was the brains behind the forced privatization of YPF, an oil company that the country seized from Spanish oil company Repsol in 2012.

Zannini is the man behind Argentina’s attempt to skirt a US Supreme Court’s ruling that it could not pay other bondholders while refusing to pay the “vultures.”

So yeah, he’s not going to pay anyone either.

Last year about this time, Scioli, considered a moderate member of Fernandez’s camp by Argentine standards, was singing a different tune.

“I am confident that a solution can be found and that we can normalize our relationship with the international markets, defending our country, but defending it intelligently,” he said then.

Of course that was right before Argentina missed the payment that sent it into default again.

What it all means is what many Argentines were considering a lost year waiting for Fernandez’s exit, could turn into a lost who-knows-how-long.

Refusing to pay the “vultures” has become a part of the national project, a pillar of party ideology. There’s still a chance that Scioli could lose to an opposition candidate of course. And there’s also the hope that he’ll change course once he’s in office.

But it’s not looking good, people.

Oh, and after Scioli is done with his term, Fernandez can run again. At least that’s the talk in Argentina.

5. ARGENTINA: CURRENCY FORECAST (Economist Intelligence Unit – ViewsWire)
24 June 2015


These forecasts were prepared on March 5, 2015

2011   2012   2013    2014    2015
Ps:US$ (av)                                 4.1     4.5       5.5       8.1      9.5
Nominal appreciation of Ps (%)   -5.2   -9.4   -16.9   -32.4   -15.2
Real appreciation of Ps (%)      14.9    10.8     -2.5     -9.6      5.5
Ps:US$ (end period)                   4.3       4.9     6.5       8.5   10.9

2011   2012   2013    2014   2015
Ps:€ (av)                                       5.7     5.8      7.3     10. 7    10.2
Nominal appreciation of Ps (%)   -9.6    -1.9   -19.6   -32.4       4.9
Real appreciation of Ps (%)          9.5    19.9     -4.2    -7.4      34.0
Ps:€ (end period)                5.5    6.5    9.0     10.3    10.7

2011    2012    2013    2014    2015
Ps:¥100 (av)                                  3.8       4.2       5.2       7.7       9.2
Nominal appreciation of Ps (%)  -11.1    -10.4   -18.1    -33.0    -16.0
Real appreciation of Ps (%)        10.7      12.0     -1.8      -8.6       6.2
Ps:¥100 (end period)                    3.9        4.6       6.2       8.1     10.5

2011   2012   2013   2014   2015
Real effective exchange rate (1997=100)   51.1   48.8      50.0   49.8     49.1

2014                      2015
Nov    Dec    Jan    Feb    Mar    Apr
Ps:US$ (av)   8.46   8.51   8.56   8.64   8.74   8.82


Persistent pressure on the black-market exchange rate highlights the large and growing risks to our benign baseline assumption that the process of peso adjustment will be managed without provoking an abrupt, uncontrolled devaluation.

The peso remained stable in the immediate aftermath of Argentina’s default on July 30th, based partly on the assumption that Argentina would come to a relatively quick agreement with the holdouts and exit default once the Rufo clause expires at the end of 2014. However, subsequent signs that the government is in fact in no hurry to come to an agreement with holdouts (as evidenced by its decision to press forward with a swap of exchange bonds to evade its troublesome US court ruling), combined with local data showing an increased fiscal deficit and a pick-up in inflation have heightened market nervousness and produced renewed devaluation pressure.

Direct intervention in the foreign-exchange market limited the weakening of the peso in the official market to 5% between late August and late September, but the value of the black-market rate has fallen much more substantially, producing a black-market premium that is now approaching 90%. Our benign baseline forecast assumes that after depreciating by close to 35% in 2014, continued adjustment under the heavily managed float will involve a still-substantial depreciation of around 20% per year in 2015-16 and around 10% per year in 2017-19.

This would reverse the accumulated real appreciation of the peso in the past five years that has eroded export competitiveness, and bring the real trade-weighted exchange rate back to around 2008 levels. However, in light of continued uncertainty over the direction of policy in the remainder of the Fernández government’s term, we continue to believe that there are substantial risks to our forecast, and a strong chance of a steep, uncontrolled devaluation at some point in the forecast period.


2011    2012    2013    2014    2015
¥:US$ (av)   79.7         79.8         97.6       105.9        121.7
US$:€ (av)   1.39         1.29        1.33         1.33          1.07
¥:€ (av)      110.9       102.6      129.6       140.7        130.7
By Charles Newbery
24 June 2015

Neuquen, Argentina (Platts)–24Jun2015/820 pm EDT/020 GMT

* Drilling costs must come down to attract capital
* Limited acreage still available, so partnerships good for new entrants
* But license law change means no rush to bring partners on board

The dozen or so companies with acreage in Vaca Muerta, the biggest shale play in Argentina, will need more foreign capital to shift into development after pilot testing, an industry leader said Wednesday.

“We need more companies and more investment,” said Alberto Saggese, president of Gas y Petroleo del Neuquen (GyP), the state oil company of the southwestern province of Neuquen, home to most of Vaca Muerta.

State-run YPF was the first to put the play into mass production in a partnership with Chevron. They are producing 43,000 b/d of oil equivalent, mostly of light crude.

Of the other players with acreage in the play, four have recently entered pilot production, led separately by ExxonMobil, Shell, Total and Wintershall.

“If the pilots work and they have to do mass development, they are going to have to find partners,” Saggese said on the sidelines of the World Shale Oil & Gas Latin America Summit in Neuquen City. “It is too much money for any of them to go it alone.”

Most estimates suggest that between $5 billion and $12 billion a year must be invested to put Vaca Muerta into mass production, helping to turn around a 20% decline in national oil and gas production over the past decade that has led to shortages and a rise in imports.

However, Saggese said that for foreign companies to bet on Vaca Muerta, drilling costs must come down to attract capital at a time when low global oil prices are shrinking investment budgets.

The goal is to reach the cost levels of $4 million-$5 million/well seen in shale plays in the US, Saggese said.

YPF is drilling vertical wells at $7 million/well, down from $11 million in 2013.

To continue cutting costs, what is needed most is foreign capital to ramp up drilling and improve operational efficiency with new technology and techniques like slim-hole drilling, Saggese said.

YPF has gone out to look for partners, entering joint ventures with Chevron and Malaysia’s state-owned Petronas for Vaca Muerta, and Dow Chemical for a tight-gas development in another play. Gazprom has expressed interest in partnering with YPF, while Canada’s Madalena Energy, Shell and others have announced plans to look for partners in Vaca Muerta.

Saggese said such partnerships are one of the few remaining entry points for new players in Vaca Muerta.

“There is little acreage still available, and it is marginal,” he said. “The acreage still available is in the foothills [of the Andes mountains] and the dry gas window.”

Of Vaca Muerta’s total acreage, YPF has a 36% share, followed by GyP with 11%, Wintershall and Total each with 6%, YPF’s Y-SUR unit with 5% and Petrobras. Andes Energia, ExxonMobil, Pluspetrol and a few other companies hold smaller percentages.

Saggese said he doesn’t expect companies to rush out in search of partners.

This is because a reform of the national hydrocarbon law last year means that the companies have 35-year concessions for their acreage. So whereas before the reform, companies would have to demonstrate their exploration and production advances on the blocks as a requirement of their licenses, now the threat of invest or lose the license is no longer there, he added.

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