South America

Argentina’s credit rating was downgraded to near-default status by two of the biggest global ratings companies after the government said it would delay payments on its short term dollar-denominated local debt, Bloomberg News reported. Fitch Ratings cut Argentina’s long-term issuer rating two notches to “restricted default” from CC, the company said in a statement, after President Alberto Fernandez’s government announced by decree it would extend payments on $9.1 billion in dollar-denominated Treasury bills until Aug. 31 of next year.

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Argentina has delayed payment on roughly $9bn in dollar-denominated debt for the second time in five months, pushing off payment until August 31 while calling on bondholders to show “good faith” in talks to restructure the country’s massive debt pile, the Financial Times reported. The government was due to repay $67m on Friday and an additional $280m on Monday for the local notes, known as Letes, according to local newspaper Clarin. These short-term bonds are sold by the country’s Treasury to individuals and companies.

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As Argentina looks set to restructure its debt, bondholders are trying to grasp the implication of two words written into most bond sales worldwide since 2014. The debate is around a “uniformly applicable” rule that sits in the collective action clauses (CACs) that comes into play in case of a debt restructuring, Bloomberg News reported. If the government chooses to sign a single accord with bondholders, the clause implies all investors have to be treated the same -- whichever bond they hold and whatever its current value.

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Argentina’s nine-day-old government has moved quickly to sidestep a debt crisis, appealing to bondholders including Pacific Investment Management Co. to roll over maturing debt, Bloomberg News reported. Finance Secretary Diego Bastourre and his deputy, Ramiro Tosi, met with Pimco officials and local bondholders on Dec. 18 to persuade them to accept new notes in exchange for 24.5 billion pesos ($410 million) of bonds maturing on Monday, according to three people with direct knowledge of the matter.

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Brazilian construction and engineering group Odebrecht is changing its leadership amid ongoing debt restructuring and difficulties to obtain new contracts, BNamericas reported. Chairman and ally of founder Emilio Odebrecht, Ruy Sampaio, will replace current CEO Luciano Nitrini Guidolin as the expected conclusion of the conglomerates' debt restructuring will also end a cycle in the company, an Odebrecht spokesperson told BNamericas.

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Foreigners have withdrawn from Brazilian equities at a record pace this year, amid persistent scepticism from global investors about the country’s economic recovery, the Financial Times reported. In total, foreign investors have pulled a net R$15.2bn (US$3.7bn) out of the country’s stock markets this year, data from the São Paulo stock exchange show. The São Paulo stock exchange has surged higher, with the benchmark Bovespa up more than 25 per cent this year. But the persistent withdrawals from foreign accounts show how heavily this rally depends on local investors.

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The left is back in control in Argentina now that Alberto Fernandez has taken office as president, succeeding the pro-market Mauricio Macri. The Peronists may have returned with an orderly transition, but Fernandez faces an economic and financial crisis and is on a collision course with the IMF, The Conversation reported. This stems from the “turbulence” of April 2018, in which the peso devalued 11% against the US dollar in less than a week amid rampant inflation, a recession, high unemployment and wider worries about emerging markets within the global economy.

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Argentina, the world’s biggest seller of processed soybean meal and oil, raised export taxes on Saturday as the government seeks to fund spending under new President Alberto Fernandez, Bloomberg News reported. After the peso’s 37 percent slump this year, his administration is replacing a levy of 4 pesos per dollar for many exports with a fixed charge of 9 percent, according to a decree in the official gazette.
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The IMF is waiting for the details of the new Argentine government’s economic plans to review its $56 billion credit line, its chief spokesman said, Bloomberg News reported. “I don’t have anything on dates or planned meetings,” with Argentine officials over the $56 billion loan, the International Monetary Fund’s Gerry Rice said yesterday. Economy Minister Martin Guzman had said on Wednesday that he had held a preliminary meeting with IMF Managing Director Kristalina Georgieva before taking office.
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