South America

Argentina’s new Peronist government has been caught off guard by global financial market turmoil at a crucial point in its talks with creditors to restructure more than $100bn of foreign debt, raising the risk that the negotiations could be delayed and result in a messy default, the Financial Times reported. Martin Guzmán, economy minister, has met investors for preliminary talks and was due to unveil the government’s initial offer this week.

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Telefonica SA and Telecom Italia SpA’s Brazilian units are working together to buy the mobile operations of Oi SA and end years of failed attempts to consolidate the country’s wireless industry, Bloomberg News reported. Telefonica Brasil SA and Tim Participacoes SA said they’ll will hold discussions on a potential joint acquisition of all or part of Oi’s mobile assets, which Bradesco BBI estimates may be worth at least 12 billion reais ($2.6 billion).

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Argentina said it intends to restructure as much as $68.8 billion in bonds issued under foreign law, a formal step in negotiations with creditors, Bloomberg News reported. It’s the first time President Alberto Fernandez’s government has explicitly stated the nominal value of debt held by foreign bondholders it plans to restructure. The two sides are in fast-paced negotiations that Economy Minister Martin Guzman intends to conclude by the end of March. The midnight government decree came hours after Argentine bonds plunged to record lows amid falling oil prices and coronavirus fears.

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Oil companies just can’t catch a break. Energy bonds plummeted Monday to record lows, some of them with extraordinary drops of 10, 20 or even 30 cents on the dollar, Bloomberg News reported. The average spread over Treasuries for companies in the Bloomberg Barclays High Yield Energy index has surged above 10% for the first time since 2016, back when hundreds of energy-related companies were going bust or restructuring. That last round of rejiggering was supposed to stabilize the industry’s future by cutting debt and extending maturities for almost a decade.

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Ecuador’s dollar bonds slumped the most in emerging markets as investors price in a higher probability of default following the crash in crude prices, Bloomberg News reported. The nation’s dollar bonds due 2028 fell 10.6 cents to 47.6 cents on the dollar on Monday, sending the yield surging 4.3 percentage points to 22.3%. The extra yield investors demand to hold Ecuadorian debt over U.S. Treasuries blew out 753 basis points to 27.33 percentage points. That compares to 28.16 percentage points for Argentina which is preparing to restructure its debt.

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Argentina’s latest debt dilemma is whether to pay or delay its local peso debt, Bloomberg News reported. While the country’s billions of dollars in foreign debt with private creditors and the International Monetary Fund have been the primary focus for investors, the nation now faces a hurdle that’s just as large: the almost 1.8 trillion pesos ($29 billion) in local debt maturing this year, an amount roughly equivalent to all the cash in circulation in the country. And while the fact that it’s in pesos should have lessened the burden, Argentina is finding it tough to refinance.

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Argentina’s minister of economy met with representatives of several major creditors, including asset management firm Pimco, a company executive and a ministry source said on Wednesday, as separate talks continued with the International Monetary Fund, Reuters reported. “We accepted an invitation to visit the ministry to discuss a range of issues (with Economy Minister Martin Guzman) on a one-to-one basis,” said Pramol Dhawan, head of the emerging markets portfolio management team at Pimco, a major holder of Argentine debt. Pimco is a unit of Allianz SE.

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Venezuela is planning to sell some of its shares in the CAF Latin American development bank to pay down its debt with the lender, representatives of the South American country’s opposition said, Reuters reported. The sale was expected to be discussed at a meeting of the CAF’s board on Tuesday, said two opposition lawmakers and a member of a committee named by the opposition to restructure the country’s debt, who warned that the move would jeopardize the crisis-stricken nation’s economic recovery.

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Uruguay’s new government wants to offer tax breaks to entice wealthy Argentines to relocate across the River Plate to boost local investment, but the rich need little encouragement to leave. Ever since Alberto Fernández took power in Buenos Aires in December and hiked taxes on personal assets, Argentines have been weighing the benefits of emigrating to escape what many see as confiscatory taxes, the Financial Times reported. The tax rate on assets held abroad is now double the local rate — up to 2.5 per cent — which is triple the level under the previous government.

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A new program being discussed by Argentina and its biggest lender, the International Monetary Fund, could set up private bondholders for heavy losses without requiring the spending cuts needed to make the country solvent, investors say, Reuters reported. Argentina and the IMF announced last month they would start Article IV consultations - allowing the Fund to inspect Argentina’s accounts - as a stepping stone to a possible new program that would replace a defunct $57 billion loan agreement struck by the previous government in 2018.

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