South America

Argentina’s inflation rate hit 53.8 per cent in 2019, climbing to its highest level in almost three decades and underlining the scale of the challenges facing the embattled country’s new leftist president, Alberto Fernández, the Financial Times reported. The national statistics agency announced on Wednesday that prices rose 3.7 per cent in December after renewed currency volatility ahead of elections last year, confirming Argentina’s place among the top five countries with the highest inflation rates in the world — behind Venezuela, Zimbabwe, South Sudan and Sudan.  Even so, Argentin

Ecuador is preparing to sell $400 million in bonds backed by the Inter-American Development Bank to fund the country’s housing program, according to a person with direct knowledge of the transaction, Bloomberg News reported. The so-called “social bond” will be offered to investors this week, said the person, who asked not to be identified because the information isn’t public. The IADB would pay bondholders $300 million in the event of a default, the person added.

Buenos Aires province has started talks with some creditors as officials seek their blessing on a plan to delay a $250 million payment due this month, Bloomberg News reported. Discussions have taken place with more than 10 groups or individual funds that own the overseas notes due in 2021, according to a provincial official who asked not to be identified. The idea is that pushing back the payment will avoid a hard default and allow the province, the federal government and creditors more time to come up with a comprehensive restructuring plan.

Bonds issued by the province of Buenos Aires fell sharply on Monday after a minister in the national government said the state would not come to its aid in making a big debt payment due at the end of this month, setting investors on alert for tough negotiations over the country’s sovereign debt, the Financial Times reported. Debt backed by Argentina’s most populous province and set to mature in 2021 fell over 10 per cent to 62 cents on the dollar. Another bond maturing in 2027 saw its price slip about 3 per cent to 44 cents, while government debt prices also wobbled.

President Alberto Fernandez said he has set a March 31 deadline to renegotiate Argentina’s rampant public debt and that a more “innovative” International Monetary Fund approves of the direction his government is taking, Reuters reported. Argentina is in talks with bondholders and other creditors to restructure about $100 billion in debt, among them the IMF to whom it owes about $44 billion. “I think that from here to March 31 our trajectory is going to be very clear,” Fernandez said in an interview published on Sunday by the online news site El Cohete A La Luna.

Buenos Aires’s plan to seek talks with creditors ahead of a debt payment due this month has torpedoed one of the world’s best bond rallies, Bloomberg News reported. The province’s $500 million of notes due in January 2021 tumbled 5.3 cents Wednesday to 64 cents on the dollar, their worst day in more than four months. The securities had returned 54% from the end of August through Tuesday, putting them among the top performers in emerging markets.

Argentina’s new central bank president pledged to further cut interest rates to boost a free-falling economy while fighting inflation through a “social pact” that would encourage companies to raise production rather than prices, Bloomberg News reported. Miguel Pesce said he expects the key rate floor to fall again in January after two cuts last month. At 55%, the benchmark rate is still the world’s highest, although considerably lower than the September peak of 85% recorded under his predecessor.

S&P Global Ratings raised its debt grade for Argentina on Tuesday, acknowledging the agency made a mistake when it changed the rating in late December for the crisis hit country, The Business Times reported. S&P bumped the rating on foreign long-term debt to 'CCC-' from 'CC,' taking it up two notches from 'SD' and back to where it was prior to December 20 when the country was declared in default. After bumping the rating up a notch on December 30, 2019, "we identified that we had misapplied our criteria," S&P said in a statement.

Samarco Mineracao SA has rejected creditors’ formal request to resume talks to restructure its defaulted debt, signaling heightened risks for bond holders, according to people with direct knowledge of the situation, Bloomberg News reported. The Brazilian iron ore venture between BHP Group and Vale SA said it has yet to firm up its business plan. And without that, the company argues that it will be at a disadvantage if it were to resume talks that have been put on hold for almost a year on its $2.9 billion in defaulted debt, the people said.

Sovereign debt’s bad boy is back. Argentina, the eight-time defaulter, is on the hook for around $100 billion of hard currency debt held in private hands, just part of its hefty borrowings, Reuters reported in a commentary. The International Monetary Fund may complicate new President Alberto Fernandez’s plans for a quick debt fix, with wonky new bond features making the outcome even chancier than usual. The dwindling liquid cash reported by the country’s treasury won’t even cover next year’s roughly $10 billion in private-lender interest, let alone principal.