Argentina

Bankrupt LATAM Airlines and Avianca Holdings are dramatically retrenching their once grand ambitions amid the COVID-19 pandemic, reducing competition in Latin America as they mull once-unthinkable cooperation with rivals, Reuters reported. Since May, LATAM has exited Argentina, partnered with rival Azul SA in Brazil and cut back domestic operations in Chile, while Avianca has departed Peru. LATAM is now open to a deeper alliance with Azul, even as the two airlines usually control a combined 60% of Brazil’s domestic market.

Argentina is still working with its creditors to reach a debt restructuring deal after talks stalled, though there is still distance to cover in economic and legal terms, Economy Minister Martin Guzman said on Thursday, Reuters reported. Guzman said the government is in negotiations with two main creditor groups, though the “biggest differences” remain with the Ad Hoc Bondholder Group, which includes AllianceBernstein, BlackRock, Ashmore and others.

Argentina was facing a third year of recession in 2020 even before the coronavirus hit. Now with the pandemic’s economic shock, some analysts foresee a record contraction in the crisis-prone country, Bloomberg News reported. One of the most pessimistic estimates is from Marcos Buscaglia, co-founder of Buenos Aires-based consulting firm Alberdi Partners and former chief Latin America economist at Bank of America Corp, who sees activity shrinking 13%. Yet, forecasts for a near double-digit decline aren’t outliers.

Argentina will release its first quarter GDP and unemployment figures today, amid the negative economic effects of the COVID-19 pandemic and uncertainty produced by debt restructuring negotiations, Foreign Brief reported. The COVID-19 crisis has ravaged Argentina’s already ailing economy. After a 1.1% year-on-year contraction in the fourth quarter of 2019 and declining economic activity during the first two months of 2020, the pandemic has deepened the country’s recession and exacerbated its troubled fiscal position.

Argentina extended a deadline for bondholders to accept a debt restructuring proposal for a fifth time as creditors blamed the government for “walking away” from talks, Bloomberg News reported. Bondholders now have until 5 p.m. New York time on July 24 to accept Argentina’s debt proposal, according to a government statement. It said officials plan to use the extension to keep talking with investors.

Argentina’s dollar-denominated bonds slipped to their lowest level in three weeks after restructuring talks stalled amid growing animosity between officials and some of the country’s top creditors, Bloomberg News reported. The bonds, which had rallied over the past month on optimism creditors and the government were nearing a deal, fell after the two sides said they were at an impasse. Dollar bonds due 2026 dropped 2 cents to 37.7 cents on the dollar as of 8:49 am New York time, their lowest level since May 28.

Argentina’s debt restructuring talks, in a tense final stretch, hit a roadblock on Wednesday with the government determined not to cede further ground after making an improved offer and a key creditor group warning that negotiations had failed, Reuters reported. An Economy Ministry source told Reuters the country was sticking by its latest proposal with a net present value of around 50 cents on the dollar and warrants linked to Argentina’s farm-driven exports. The offer was shared with creditors during recent talks.

LATAM Airlines Group said on Wednesday its Argentine subsidiary will cease operations indefinitely, canceling all domestic flights, its first major cutback since filing for bankruptcy protection, Reuters reported. The announcement fell short of saying the company, Latin America’s largest airline, will entirely wind down its subsidiary, although it is unclear if it will ever resume operations. A LATAM spokesman said the subsidiary will begin a government process in Argentina before it can lay off 1,715 employees.

Farmers are lobbying against the Argentine government’s proposal to sweeten an offer on its overseas debt with payments tied to agriculture exports, Bloomberg News reported. Economy Minister Martin Guzman, who’s leading talks to restructure $65 billion of foreign debt, has put the idea on the table, though some creditors favor coupons linked to economic growth.

Investors holding debt protection for Argentina are set to share compensation of some $1.5 billion after the South American nation defaulted on its foreign debt for a ninth time last month, Bloomberg News reported. Firms holding the country’s credit-default swaps will receive about 68.5% of the amount covered by the instruments, according to the final results of an auction to settle the contracts on Friday. They get triggered when a borrower fails to pay its debt. Investors use the instruments to make negative bets on borrowers or as hedges for bond investments.