South America

Argentina is hoping an offer it must make to a US appeals court by Good Friday spelling out exactly what it is prepared to pay its “holdout” creditors will be enough to avoid crucifixion in its high-stakes sovereign debt drama, the Financial Times reported. The saga – which centres on interpretation of two little words in Latin: pari passu , or equal treatment – has gripped the international financial industry for months. It has pushed Argentina almost to the brink of a new default and raised fears that the case could set a precedent making sovereign restructurings harder in future.
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Opposition from foreign bondholders is unlikely to stop the takeover of Brazilian power holding company Grupo Rede Energia SA by two rivals, several sources with direct knowledge of the situation told Reuters. The process should be concluded ahead of a court-mandated deadline in July, and the buyout plan by Equatorial Energia SA and CPFL Energia SA may help limit losses for bondholders, the sources said. But bondholders are fighting a proposal that would restructure Grupo Rede's debt and cut the value of their holdings by 85 percent.
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Argentina has greeted an order from a US appeals court for more information on its offer to holdout creditors as a glimmer of hope in its fight not to pay “vulture funds” without a steep writedown on their debt, the Financial Times reported. “We are not trying to convince the vultures to participate, we are trying to convince the judges, and that’s why it’s a good sign that the court has asked Argentina what the 2010 offer means,” Hernán Lorenzino, the economy minister, told the newspaper Página 12.
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Default Fears Hit Argentina

Worries that Argentina is inching closer to default sent the cost of insuring the country's government bonds to their highest level since November and pushed shares in its benchmark index lower, The Wall Street Journal reported. The move followed remarks made by Argentina's lawyer in a U.S. appeals court hearing in New York on Wednesday, suggesting the government would choose to default if ordered to pay creditors who hadn't agreed to new terms for their debt resulting from the country's 2001 default.
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The Colombian central bank is gearing for a challenging year that will test its ability to steer the economy out of a slowdown while also fighting off the peso's appreciation, one the most disruptive challenges faced by local monetary authorities, The Wall Street Journal reported. "We are seeing high levels of uncertainty regarding the nature of several shocks to prices and production," said Jose Dario Uribe, the central bank chairman, in an interview.
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Venezuela Slashes Currency Value

Venezuela devalued its currency against the dollar on Friday, a move made by the government of ailing President Hugo Chávez to ease deepening shortages, but is also expected to stoke inflation and further weaken the economy, The Wall Street Journal reported. The bolívar—whose official name is the Strong Bolívar—was slashed by nearly a third of its value to 6.3 per dollar from a previous rate of 4.3 per dollar, Finance Minister Jorge Giordani told a news conference.
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Bankruptcy Regime For Nations Urged

Argentina’s messy legal battle with hedge funds over its 2001 sovereign default has heightened calls to resurrect plans for a bankruptcy regime for countries, under the auspices of the International Monetary Fund, the Financial Times reported. Many senior lawyers, fund managers and former policy makers say recent court rulings against Argentina highlight the weaknesses of the current approach to government debt workouts, and argue that it is time to revisit the “sovereign debt restructuring mechanism” proposed by the IMF in 2002.
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Global regulators gave banks four more years and greater flexibility on Sunday to build up cash buffers so they can use some of their reserves to help struggling economies grow. The pull-back from a draconian earlier draft of new global bank liquidity rule to help prevent another financial crisis went further than banks had expected by allowing them a broader range of eligible assets.
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Investors who hold Argentina's restructured debt are seeking to have New York's highest court consider whether a bond provision requires the country to equally treat holders of defaulted and new bonds, Bloomberg News reported today. The bondholder group, which includes Brevan Howard Asset Management LLP and AllianceBernstein LP, said in a court filing that interpretation by the state Court of Appeals in Albany is needed to determine whether Argentina must make payments on defaulted bonds when it pays holders of restructured debt, as a federal court judge ordered it to do.
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Brazil’s consumer-loan default rate fell in November for the first time in five months as the government pushes banks to reduce interest rates, Bloomberg reported. The consumer default rate fell to 7.8 percent from 7.9 percent in October, the central bank said in a report distributed today in Brasilia. Interest rates to consumers fell to a record 34.8 percent.
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