Gesamtzahl der Seitenaufrufe

Mittwoch, 6. November 2013

Lead Articles: Zero Hora: “Time to debate relations” (Maia) Infobae: “Plan presented to solve the debt with the holdouts” El Cronista: “Vulture fund that is suing the country ends up with an English bank” El Cronista: “For Wall Street, the risk of a local default has been reduced by half” Ambito Financiero: “Argentina paradox: predictable, but also worrisome, future”


 
Zero Hora
Time to debate relations
It’s a great opporunity to review the priority that Brazil gives to Argentina  
 
Tuesday, November 5, 2013
 
By Marco Maia
 
Such a situation makes it urgent to establish new standards for economic relations between Argentina and Brazil.  Experts from both countries identify the central problem of Argentina: its current inability to attract international capital, a fact directly related to the successive refusals by the government of that country to negotiate any kind of agreement with several of its foreign debt creditors.  It’s evident that Brazil should see Argentina’s development as part of its own development and vice versa.  It also is not in our interest to create difficulties for our neighbor at this moment when the Argentine government is fighting a tough battle to contain inflation.  Internal and external challenges reinforce the need for stability over the long term in trade between Brazil and Argentina, making evident the need for a stronger position from Brazil in the sense of bringing Argentina back to the capital markets.  But to continue applying measures of reciprocity is a clearly legitimate attitude.  At least until the results of the negotiating table set compensatory rules or show themselves efficient in re-establishing normality in trade relations between the two countries.
 
Parallel to that, it’s a great opportunity to review the priority that Brazil dedicates to Argentina in the trade field.  Well on the side here, Venezuela, Colombia and Peru, countries with constant annual growth rates and with a total population that exceeds 100 million people, arise as excellent alternative markets for our exports.  One also must take into account the BRICS (besides Brazil, includes Russia, India, China and South Africa) whose governments, already in 2014, promise to create a joint bank for promoting development in their countries.
 
But it does not seem that simply implementing a policy of retaliation will bring promising results in the economic relations between the two countries.  This is, without a doubt, the ideal moment for us to review the privileged position that the “hermanos” occupy in the portfolio of Brazil exports, even with the scenario of uncertainty around the economic and political future of Argentina.  This diversification in trade relations will also serve to protect our economy in case of an economic decline in our neighbor.
 
* Federal deputy (PT-RS), head of the Foreign Relations and National Defense Committee  
 
 
Infobae
Plan presented to solve the debt with the holdouts
Is pushed by attorney Eugenio Bruno.  He seeks not only to settle with the funds but that the country also receive fresh money from investors for energy.  There is another proposal from an international investment fund.
 
Tuesday, November 05, 2013
 
In the market there are two plans in play to solve the lawsuit with the holdouts.  One is from the investment fund Gramercy, which is seeking to have the bondholders contribute money from their pockets to pay the debt of the vulture funds (US$1.5 billion).  This option would be an agreement between private parties without even the consent yet of the Economy Ministry.
 
The second plan that is coming out runs from the account of Eugenio Bruno, attorney from the Garrido firm.  The expert prepared the so-called “Program of Integral Settlement of the Debt in Default.”
 
The general lines of it consist of the following points:
 
-For the principal due in 2001, there is acknowledgement of principal with a 25% haircut.  Bonds for the said 75% with an annual interest rate of 4% and coming with an expiration term based on the demands of the holdouts and Argentina’s capacity to pay.
 
-Owed interest since 2001 to the present: acknowledgement of a rate of 4% annual.  Delivery of a 5 year bond and payment of a part in cash when the operation closes.
 
There would also be a component of fresh money that would come into the country through this operation.  According to the plan, for the majority of the holdouts, the big holders (more than US$50,000 nominal) they would have to subscribe 10% of what they would receive to an Energy Bond.  Plus reinvestment of interest in Energy Bonds for an amount of US$500 million.  
 
For their part, the swap bondholders will have the option of reinvestment of future payments up to US$1 billion in Energy Bonds.  There is not money from the swap bondholders to the holdouts.  They would be asked to move up the expiration of the RUFO clause (which does not allow an improvement on the offer of 2005 and 2010) from December 31, 2014, to April 30, 2014.  It would require an acceptance rate of 85%.
 
It is estimated that the minimum percentage of acceptance of the holdouts would be 90 to 95%.  If the percentage is greater than 95%, there would be a cash payment at closing and if it is 100%, the payment amount in cash would be larger.
 
"Argentina would solve the whole issue once and for all and forget about judicial threats.  It would get fresh, new money for energy.  It would improve relations with investors in the U.S., Europe and the international community and unblock investments for energy and infrastructure,” Bruno says.
 
"It also settles an old issue with retail bondholders that bought before the default and they are in their thousands, particularly in Italy, and have very significant amounts and have rights.  It’s a slow path with obstacles, but we are cautiously optimistic now that the options (default) are very bad for the three parties (holdouts, swap bondholders and national state),” the attorney from the Garrido firm said.
 
 
El Cronista
Vulture fund that is suing the country ends up with an English bank
 
Tuesday, November 05, 2013
 
The U.S. vulture fund Aurelius Capital Management, protagonist of a complicated and extensive judicial battle with Argentina over the default on the debt, will enter as a shareholder of Co-op Bank under a rescue plan for the British trade lender, according to a report from Reuters news agency.  
 
The New York investment firm is among a group of activist investors that will swap their holdings for shares in Co-op Bank, which for some time has promoted a commitment to ethical trade practices to attract clients.
 
Aurelius, which will be the largest hedge fund shareholder in Co-op Bank under the plan detailed yesterday, has a history of litigation to resolve disputes.  Among them is the battle to order Argentina to pay US$1.3 billion after a default that occurred in 2002, after the funds refused to participate in two debt restructurings.
 
Aurelius is battling together with NML Capital Ltd, a unit of Elliott Management Corp, another high-profile activist which achieved the detention of the Frigate Libertad in Ghana last year to put pressure towards obtaining payment on the debt.
 
However, a U.S. appeals court Friday rejected a petition from the creditors to lift a stay that allows Argentina to not comply yet with a sentence to pay US$1.33 billion.
 
Aurelius was also recently involved in a legal battle for its investment in the Tribune media company.
 
 
El Cronista
For Wall Street, the risk of a local default has been reduced by half
 
Tuesday, November 05, 2013
 
MARÍA ELENA CANDIA Buenos Aires
 
The decision of the Court of Appeals to reject the petition to lift the stay last week, while awaiting the U.S. Supreme Court to act, ended up confirming the evaluation of the risk of an Argentine default by the market  since the moment before the elections.  Over recent weeks, investors have been betting that the likelihood of Argentina entering into default has gone down.
 
For this reason, Credit Default Swaps (CDS) at one year have experienced the biggest decline in the world in recent months, from 5,300 basis points at the start of September to 2,800 yesterday, while the CDS at 5 years went down in the same period from 3,000 basis points to 1,800.
 
“While they are important declines, recalling that CDS at one year and five years hit peaks of 8,900 and 3,640 basis points respectively, they are still levels that are considerably higher than seen before the first ruling from Griesa in October 2012, when the first was at 630 and the second at 970 basis points,” explained Diego Chameides, economist with Quantum Finanzas, when consulted by El Cronista.
 
According to Jorge Piedrahita, the CDS had a very important contraction after the primaries (PASO) and began to widen slowly after the legislative elections.  “The denial of the lifting of the stay by the holdouts reduced uncertainty and helps, but it was what any well-informed investor expected.  For that, the consequence in prices is very light.  In the coming months the issue of the litigation will continue to be a sword of Damocles,” Piedrahita added.
 
What is clear is that the ruling that demands that Argentina pay the holders of unpaid bonds US$1.5 billion when the country complies with its restructured debt was postponed until the Supreme Court decides if it takes the case, which is unlikely to happen until 2014, according to legal experts.  The measure is added to the expectations that there could be an extrajudicial settlement among the private funds to avoid having the country enter into a technical default.  
 
For Chameides, while the result of the elections could have had some impact, prices are reflecting a greater possibility of an agreement with the holdouts and the apparent willingness of the government to solve a series of issues that will facilitate access to the international markets, like an agreement with companies with firm judgments in the ICSID and the configuration of the new CPI.  
 
However, predictions for the future are not very positive.  Once the market discounts this good news, the indicators of risk could start going back up.  “I believe that the risks that coverage against default will rise in the medium term once again.  There will be two difficult years for the country, where measures will be implemented that are against the market,” explained Walter Molano, chief of research at BCP Securities.
 
 
Ambito Financiero
Argentina paradox: predictable, but also worrisome, future
 
Tuesday, November 05, 2013
 
by: Fernando Navajas, Chief economist for FIEL
 
A retrospective look at the immediate post-electoral scenario is quite predictable on economic matters, independent of the big significance of the elections for the possible post-2015 political future.  Predictable doesn’t mean that it isn’t worrisome.  Inflation and the dollar, to name two variables that anyone knows about, don’t mean that we are heading for a period of macroeconomic stability.  And in energy, which for much time has been considered merely a “micro”-problem, or sectoral, can be written into Argentina’s macroeconomic history if the speed of the fall in gas supply is not reversed, as it heads for a record high for the last 50 years in matters of imports vs. GDP.  But even with all this, very well known, the surprise for many economists has been the capacity of the economy to recover in this cycle: that is what industry has done, investment in machinery, and construction.  The economic agents, in their daily decisions, don’t expect a serious disruption of economic and financial variables in the short term.  That means that, having most voted against the style and/or policies of the government, they are acknowledging that the government hasn’t lost control and while there are still strong relative price corrections ahead, the long-term outlook for Argentina seems, in terms of national revenue, very sustainable.  When someone buys a car or decides to reactivate construction they could be protecting themselves, but at the same time are convinced that they permanent income will not be pulverized because they are making decisions that could easily be postponed if they were certain that a severe crisis was imminent.  That means that there is still some anchor of expectations that plays favorable for the climate not turning very stagflationary.
 
That anchor has a first and last name, and it’s a controlled official devaluation over the huge loss of reserves that will not be able to go on indefinitely.  That means the government is heading inexorably, and independently of the media investiture (like an electoral defeat) that one wants to use, to a point of inflexion in the regime of determining the exchange rate.  How this transition to a new regime is handled will depend on a very important crossroads of economic variables that g from inflationary expectations and formation of prices (wherein the period of remarking or indexing is short) on service rates and salaries, to the interest rate and the health of the financial system itself (due to the gap between loans and deposits if inflation accelerates).
 
The problem of inaction is not simply that the government is not doing what is in view of anyone and in its reach.  The thing is more complex and with different shades that overlap the economy and politics.  In the economy, there is a whole field of study around postponing action (or procrastination) which happens when the cost of making decisions is high and there are, or they believe they see, signs that they can continue on in the same path.  The problem is that those signs are at times loud and false and make one believe that one can make it through.  The data that we commented on regarding the level of activity are a clear example of this.  And also it is about the opinions of many colleagues that like to cautious it seems that the government says to them, “let it go, to get to 2015,” which reinforces the idea that one can make it through without changes.  In addition to the internal situation there is also a complex external front due to the judicial threat that weighs upon Argentina around a blocking of service on its external debt.  There are ideal signs emerging here that it could all go to sleep for a while and decisions can be postponed around an agenda to protect the payment mechanisms.  One of these signals is the “non-imminence” of judicial decisions in the U.S.  The other is the appearance of proposals of private self-negotiation that in my opinion are generating tremendous doubts about how they would work since it would involve a very costly coordination.  Because defaults are not self-negotiated and there is an important institutional vacuum at the global level. 
 
In the political sphere, the underlying problem is the existence of the goal or restriction on avoiding a crisis of political identity for the government, because actions that communicate “austerity” will be read as a renouncing of the path that previously had been announced as unchangeable.  Faced with this, it can only be said that pragmatism is the art of going through such a regime change.  For that it’s political. Apart from all the distances and possible qualifications, that is what Alfonsin did in 1985 and, in much greater scale, Menem in 1989.  And it very possibly would have been considered or at least heard from Kirchner if he’d been in command of this situation today.  It’s about passing the final test of choosing between changing or sustaining your political movement or playing the surrogate game and running the risk of perishing.
 

Keine Kommentare: