rolf´s argentinien-blog: Argentina: moving towards financial normalisation?

Dienstag, 15. Oktober 2013

Argentina: moving towards financial normalisation?

Oct 14, 2013 10:48pm by Benedict Mander

Anyone unsure as to why Argentina fills foreign investors with dread need only take a glance at the list of cases it has at the International Court for the Settlement of Investment Disputes (ICSID).

Of a total of 439 legal disputes between countries and companies at the World Bank tribunal, no fewer than 50 involve Argentina – far more than anywhere else, with socialist Venezuela lagging some way behind in second place.

But that figure looks set to fall to 45 if the Argentine government confirms that it will issue $500m in debt to resolve international arbitration claims filed at the ICSID by five foreign companies, including three from the US, France’s Vivendi and the UK’s National Grid.

After insisting for years that the disputes must be settled in local courts, this marked a major change in Argentina’s strategy at the ICSID, where most of its cases were sparked by actions taken by the government during the devastating 2001-02 financial crisis.

Executives at Spain’s Repsol – which has filed a case at the ICSID after its stake in Argentine energy company YPF was expropriated last year so far without compensation – will have noted the development with interest. So will other companies interested in investing in Argentina’s vast shale gas reserves, which have already attracted interest from Chevron, Dow and Wintershall.

Some even described the move as a significant step towards Argentina’s “external financial normalisation.”

That may be overstating the development, although it does seem to mean that the US will stop blocking financing for Argentina from multilateral lenders, given its irritation with Argentina’s renegade behaviour with foreign companies at the ICSID, and its refusal to pay its Paris Club creditors, of which the US is a member.

Indeed, the World Bank is now set to embark a $3bn loan programme for Argentina for 2014-16, according to the government.

Still, this won’t do much to stop Argentina from haemorrhaging foreign exchange reserves, thanks in large part to costly energy imports. And it is even less likely to make any difference to the “holdouts” that refused to participate in debt restructurings after the 2001 default.

President Cristina Fernández has made it amply clear that she has no intention of paying the holdouts anything beyond what was offered in the latest 2010 restructuring, wrote Daniel Kerner at Eurasia Group in a note to clients on Monday. He continued:

So unless holdouts creditors accept these terms, something that is unlikely, we still expect Argentina not to comply with a potential adverse ruling [from the US Supreme Court] and explore ways to pay holders of restructured debt outside of the US.

But Fernández will not be around forever. It is now clearer than ever that she only has two years left in power, which was the reason for a fairly positive note from Capital Economics last week. Glimpsing “light at the end of the tunnel for Argentina”, it concluded:

With mid-term elections approaching and Cristina Fernàndez’s hold on power seemingly slipping, some are betting on Argentina’s economy to roar back. This is premature – in fact, in the near term, a more uncertain policy environment will only increase the risks of a crisis. But assuming that the 2015 elections return a more orthodox government, we think that a few small fixes could stabilise the economy and perhaps lift potential growth to 4.5-5.0%, from 3.0% or so currently.