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Freitag, 11. Oktober 2013

Ambito Financiero Agreement is signed to pay judgments at the ICSID Friday, October 11, 2013 By Guillermo Laborda

Lead Articles:
Ambito Financiero: “Agreement is signed to pay judgments at the ICSID”
El Cronista: “The government will pay ICSID sentences and US$3 billion in loans is unblocked”
La Nacion: “World Bank credits of US$3 billion are unblocked”
La Nacion: “A revival of the pro-market plan from 2008-2009”
Additional English Clip:
The Economist: “Cristina Fernández: No sympathy vote”
·         La Nacion, AF and El Cronista report that the markets in Argentina rallied with “euphoria” after the rumors circulated during the trading day about an agreement to pay the ICSID judgments (it was reported as having been confirmed after markets closed last night).  The Merval rose 4.4% in heavy trading, and Argentine sovereign bonds soared as high as 7% on the secondary market.   Continued high spirits are expected in today’s trading.
·         Amado Boudou was again tripped up and prevented from a high profile moment yesterday, El Cronista reports, when he was scheduled to make the big announcement about the ICSID settlements, with Hernan Lorenzino participating by video conference from Washington.  However, a “technical failure” in the satellite connection (according to the Casa Rosada) caused the announcement to be cancelled. 
·         Cristina is expected to leave intensive care and be transferred to a secure hospital room today or tomorrow.  La Nacion reports from sources within her inner circle that the hospital will not release Cristina until she has made “a full recovery.”  La Nacion goes on to report that there are “growing pressures” from within her political camp to get her back out in public as soon as possible: “There are strong pressures because they want her back fast.  They want to cut short Amado Boudou’s interim presidency,” the paper quotes officials. 
·         El Cronista reports that even though the IMF is pleased with the progress of Argentina’s new national CPI, "the parties have not managed to come to an agreement and as of yesterday there were profound differences” according to an IMF source.  The multilateral organization is demanding that the current INDEC CPI, which is being manipulated by the government, be abolished definitively, but Argentine government officials refuse to do so immediately and want to make a slow transition to the new indicator.
·         AF reports that Hernan Lorenzino, while at the meeting of G-24 finance ministers at the IMF meeting in Washington, said the IMF “must revise its debt policies,” continuing the government’s line about “new mechanisms” for sovereign debt restructurings.
·         No political topics are trending this morning.

Ambito Financiero
Agreement is signed to pay judgments at the ICSID
Friday, October 11, 2013
By Guillermo Laborda
It as all ready to be announced in December 2009, when it was left for after the end of the year to sign the contracts.  But it was overwhelmed by the fight over the BCRA reserves and the Treasury Solicitor, Osvaldo Guglielmino, was one of the victims of that battle.  His resistance to battle to the end against Judge María José Sarmiento, who backed the measure against the use of reserves, was what sent him to the guillotine.  Guglielmino had worked with the Economy Ministry on the agreement.  After his resignation on January 27, 2010, they had to start from scratch.  
Then in 2012 one could see some symptoms of the agreement being revived, but it had to be updated.  The give companies, Blue Ridge Investments (over the claim by CMS), CC-WB Holdings (for the claim from Continental Casualty Company), Vivendicon Aguas del Aconquija, Azurix and NG-UN Holdings (for claims in this case before the United Nations tribunal) were ready to accept bonds as part of the payment, haircuts on capital and interest.  After the presidential high sign for the start of negotiations, the dialogue because with Minister Hernán Lorenzino. He had no margin of error.  The agreement should have come out.  His finance secretary, Adrián Cosentino, had the day-to-day task.
In any case, there was an order that Guillermo Moreno travel to Washington to sit down with the companies with judgments already in the ICSID and also the UN.  This happened in December 2012.  In the meeting, despite what the creditors had originally imagined, the dialogue was fruitful.  The headquarters of that secret meeting: the Argentine embassy near Dupont Circle.  Two months earlier the first of the secret trips had come about.  In Buenos Aires there was John Kerry, the American Secretary of State, in a quick tour of the region.  He wanted to know through Ambassador Vilma Martínez what the Argentine reality was.  Or at least this was one of the motives.  The rest will have to come from Wikileaks.
This year, the negotiations accelerated.  Of course, the creditors also had to agree among themselves.  A structure similar to the reopening of the debt swap was used: the creditors make the offer to the country, including haircuts on principal and interest, and also payment with bonds.  The launch of the capital amnesty in mid-year added a channel to sing “the most marvelous music” to the government’s ears, which is the commitment to reinvest part of the claim (far above what is paid out).  It was a BAADE purchase (which now means the Bulgheroni’s bonds won’t be so affected).
Ambito Financiero reported on September 28 that the negotiations were now advancing.  And they did until yesterday.  The “Transactional Agreement” came together, as they are called when signed, with the following main points:  
1) Boden 2015 will be delivered for the payment of capital with a haircut of 15% on the original amount of the sentence.
2) Bonar X will be delivered for late interest with a 45% haircut on the total owed for this provision.
3) 10% of the original claim amount must be reinvested in BAADE.
4) Obviously all judicial actions and costs of this process are left aside.
The key for the country is that the government of the United States, in this Kerry is playing, will stop voting against Argentina in the entities.  It’s what unblocked the disbursements from the World Bank, for US$1.8 billon the short term.  Beyond the initial doubts that this might not come together, the reality is that last night with the agreement from Lorenzino in Washington, it began to come to light.  It’s important to recall that the reach of the IADB (Inter-American Development Bank) was already empty.  There, Argentina could overcome the United States’ negative vote.  Not at the World Bank.  An end for an IOU, in which everyone wins.
El Cronista
The government will pay ICSID sentences and US$3 billion in loans is unblocked
The World Bank will pay out that sum in three years for health and infrastructure projects.  The United States will stop voting against, and will authorize the credits  
Friday, October 11, 2013
The Economy Ministry and the World Bank (WB) yesterday reached an agreement by which the multilateral organization will unblock US$3 billion in credits in the coming three years for projects in health, rural development and infrastructure, according to what was announced in a joint statement.
For that, the government agreed to pay the judgments against it that were sleeping at the International Center for the Settlement of Investor Disputes (ICSID), the tribunal of the World Bank.  Those unpaid litigations – whose settlement still was not officially announced – were blocking the approval of credits by the United States and provoked rows with other countries.
According to official information, Economy Minister Hernan Lorenzino and WB Vice President Hasan Tuluy announced a “2014-2016 strategic alliance” which the organization will end up perfecting and will carry to its board.  That will mean, according to WB sources, payments of US$3 billion for the next round.
On the board, the United States has key weight, a country which has voted against the country for two years.  The administration of Barack Obama demands the country solve the litigation with the vulture funds, pay the debt in default with the Paris Club and the judgments against it at the ICSID.  On this last point, progress was made over the last month.
Different official sources, from multilateral organizations and the private sector, confirmed that Argentina will pay sentences for some US$1.3 billion in bonds and with a considerable haircut.  It will pay out some US$500 million in total.  
Thus, it will pay the judgments that were won by the firms Azurix (which provided potable water and sanitation in the province of Buenos Aires); Blue Ridge (gas); Vivendi (Aguas del Aconquija, Tucumán); National Grid (former partner of Transener) and Continental Casualty Company (ex-partner of the CNA ART, with Treasury Letters in pesified dollars).  All these companies filed lawsuits with the devaluation, in 2002.  Thanks to an extrajudicial settlement, they will collect with Bonar 2017 and Boden 2015 bonds.
This way, the government is showing a will to negotiate with the United States, in the midst of the all-but-lost litigation with the vulture funds for US$1.5 billion.  According to what has come out, it won’t be the only gesture that the Executive will make to the international financial community.  Lorenzino is in Washington, where on Wednesday he held conversations with U.S. Treasury Secretary Jack Lew.  Today he will participate in the annual assembly of the IMF and WB.  In parallel, he will try to convince the IMF to back the new national CPI.
The extrajudicial settlement to pay the judgments was going to be announced yesterday afternoon through a teleconference between Lorenzino and Vice President Amado Boudou, which was cancelled at the last minute, those close to Boudou said.
The settlement must pass through Congress, as the government does not acknowledge the debt and does not account for it in the country’s liabilities.
The money comes at a time when internal financing is running out and the drainage of dollars is continuous.  “Argentina has been insisting in international forums about the need to orient financing to social infrastructure and development,” Lorenzino celebrated, after having his picture taken with WB President Jim Yong Kim. The country counts currently on 31 projects financed by the WB, for US$6.2 billion.  The new agreement will renew loans that will end up being paid next year, by which the final amount will remain constant.
La Nacion
World Bank credits of US$3 billion are unblocked
Agreed with the government to take up the plan on its board; the loans will be destined for health, education and rural development; it’s a relief for the country  
Friday, October 11, 2013
by Silvia Pisani  | LA NACION
WASHINGTON.- The World Bank agreed with the government to take up on its Board a plan of credits for the country that contemplates a total disbursement of US$3 billion, destined to finance programs in health, education and rural development.
The agreement was signed yesterday in this capital after a meeting held by Economy Minister Hernan Lorenzino with World Bank Vice President for Latin America and the Caribbean Hasan Tuluy.  In a joint statement, it was indicated that the document “is in its final phase and will be presented to the board” for consideration.  The fact that it has been agreed to present the program to the board means in these cases that its approval is almost assured.
The announcement became known in the midst of a day full of rumors about the possibility that Argentina had agreed to pay judgments against it before the International Center for the Settlement of Investor Disputes (ICSID), of the World Bank. These rumors pushed up sovereign bonds in dollars, which closed the day with increases of up to 7.35%.
For the moment, the date that these loans may be available are not known, nor the dates in which the disbursements would be made. Usually, these are programs involving US$1 billion dollars per year, for a period of three years; in this case, between 2014 and 2016.
For the Argentine government, the announcement implies a breath of oxygen amidst the need for financing. Also, a weighty relief from the financial punishment that it has been subjected to by countries that have sanctioned its "misconduct" in this field. However, for reasons that were not revealed, the information was given a very low-profile, which, in fact, was limited to a joint statement. At noon it had been announced that there would be a teleconference to publicize the decision of the World Bank, in which Amado Boudou (in charge of the Executive Branch) would participate in Buenos Aires, and Lorenzino, in Washington.
The teleconference between Buenos Aires and Washington (where Lorenzino attends the Joint Assembly of the IMF and the World Bank) was postponed on the grounds of "technical problems" with the satellite connection. Then it was directly cancelled and, finally, both Boudou and Lorenzino opted for a notable silence.
The same lack of response was seen at the Argentine Embassy in this city and in the Office of the Financial Representation of the country here. Thus, the announcement was only made by means of a one-page statement backed jointly by the Bank and by the Argentine government.
Meanwhile, in Buenos Aires, rumors revived about an allege agreement for the country to pay the judgment that the ICSID tribunal issued against it, as a consideration that would free up the path towards the loan program.
The possibility, reported months ago by LA NACION and re-floated in recent weeks by the Ambito Financiero daily newspaper, refers to the possible delivery of US$500 million in government bonds to pay the sentences to five companies (Azurix, Blue Ridge Investments and Vivendi are the main ones).
Without mentioning that possibility, the statement, released late in the afternoon yesterday and which advertises the possibility of progress in the loan program, is much more moderate in its expressions. It says that the “preparatory work” is "in its final phase” for the Argentina to conclude a new "strategic partnership" with the World Bank for the next three years, beginning in 2014, and that the respective documents "will be presented" to the board of the World Bank.
The agreement in principle was achieved in the course of work meetings between Minister Lorenzino and Tuluy, of the World Bank. The text includes brief expressions from both. "Argentina has had significant achievements in the reduction of poverty and promotion of greater equality in the past few years," said Tuluy.
"From the World Bank we have been accompanying these priorities, and we continue to support efforts to reduce poverty and generate greater opportunities," he added. He did not, on the other hand, make any mention of the eventual release of objections toward the country over the judgments in the arbitral tribunal of the Bank.
Without reference to that issue, Lorenzino also had his statement in the text. "Argentina insists on direct funding for social infrastructure and development. This strategic agreement with the World Bank reinforces the commitment to the most vulnerable sectors and regions of our country."
For years, Argentina has suffered from countries opposed to be granted funding blocking it at the World Bank, as a result of the judgments that it has not honored. Among them are the United States, Germany and Japan.
The same situation exists in the Inter-American Development Bank (IADB), but there, the loans have failed to be blocked because the pressure of those in opposition is reflected in a vote diluted by the backing of countries in the region.
With access to the capital markets closed, so far the IADB and, if all goes well, also the BM will become the only two sources of external financing for the country.
La Nacion
A revival of the pro-market plan from 2008-2009
Friday, October 11, 2013
by Martín Kanenguiser | LA NACION
The evident failure of the capital amnesty and of the strategy of deepening the currency exchange restrictions, reflected both at the electoral level and in the continuous loss of reserves, resulted in a revival of the financial normalization plan outlined by the government in 2008-2009.
This can be proven with a number of issues decided in the last few weeks:
-The progress in the negotiation with the IMF on the new consumer price index to replace the metropolitan indicator, questioned since 2007, which will include (despite the government not wanting to) a reset of inflation-indexed bonds going forward.
-The plan to reopen the debt swap, which is quite delayed, but, according to the Economy Ministry, is advancing. This will add a couple of points to the acceptance level, but will not solve the problem with the holdouts.
-The announcement yesterday that the government, in exchange for paying five judgments won by companies in the ICSID with a haircut, earned a nod from the World Bank by taking up a new package of loans for the period of 2014-2016. This will ensure, after a year of being frozen, the promise of obtaining new external funds. Although the World Bank says that even without these resources, Argentina is receiving more money than it pays, there are economists linked to Vice President Amado Boudou and Minister Hernán Lorenzino who are already not defending the strategy of “debt reduction” with BCRA reserves carried out since 2010.
For the World Bank to soften up, the dialogue with the U.S. Government and with the President of the IADB, Luis Moreno, were important. Despite being focused on the problems of the '' shutdown '', American officials welcomed the news from the ICSID.  It remains to be seen whether, in addition to receiving Bonar X and Boden 2015 bonds, these companies will buy Baade bonds, as speculated in the Buenos Aires’ financial center.
This settlement may imply a greater receptivity for the Obama administration to presenting a brief before the U.S. Supreme Court for it to take up the case of the holdouts, but not necessarily a greater commitment on matters of investment, especially because the government is still making no progress with the Paris Club (because it wants fast compensation for this payment and does not want the IMF in the middle) and barriers to imports and currency remissions for foreign companies. These decisions reflect that the Boudou wing, despite the discredit he carries, and the rumors of Lorenzino’s departure, has recovered some oxygen against Vice Minister Axel Kicillof and Commerce Secretary Guillermo Moreno. Thus, part of the plan of then-Cabinet Chief Sergio Massa and then-Minister Boudou from 2010 will come together after all.  "The intention would be to revive the cuts to subsidies, announced but not implemented, and reallocate part of expenditures to relieve pressure on monetary policy," explained a pro-government economist.  It will be more difficult, the source admitted, to convince the President that it is still a good idea to return to the markets to take on debt.

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