South America

An unexpected New York court decision has raised the spectre of an Argentine government default, causing a rise in the cost of insuring against a payment failure and rattling the country’s bond market, the Financial Times reported. The 2nd US Circuit Court of Appeals in New York late last week ruled that Argentina was legally barred from prioritising payments to bondholders that participated in debt exchanges in 2005 and 2010.

The world's biggest banks are drawing up tactics to strengthen their hand in future sovereign debt restructurings, as they seek to avoid another situation similar to the Greek debt talks, when government pushed them into accepting to tens of billions of euros in writedowns, Reuters reported on an International Financing Review story.

Police in Sao Paulo said on Monday they had arrested the former head of bankrupt Brazilian lender Banco Cruzeiro do Sul on charges of money laundering and crimes against the country's financial system and capital markets, Reuters reported. Last month Brazil's central bank ordered the liquidation of the bank and its subsidiary, Banco Prosper, after seizing the lender on June 4 due to fraud-related losses and after administrators failed to find firm takeover bids. The liquidation of the bank represents one of the biggest collapses in the country's banking system in years.

Brazil's central bank seized Banco BVA SA on Friday, the latest sign of strain facing the nation's small-sized lenders following years of fast credit-fueled growth, Reuters reported. Deteriorating financing conditions and a breach of regulations at the Rio de Janeiro-based lender were cited as the main reasons behind the decision, the central bank said in a statement. Banco BVA had in recent weeks been at the center of speculation over a potential collapse.

A weekend gathering of the world's top finance officials deepened conflicts among some of the largest economies, raising fresh doubts about their ability to find big steps quickly to boost the flagging global recovery, The Wall Street Journal reported. At the annual meetings in Tokyo of the International Monetary Fund and World Bank, European officials bickered about the damage caused by austerity; this week they head into a major euro-zone summit with no clear rescue plan for Greece.

The global economy risks skidding toward recession just three years after pulling out of the previous one, the International Monetary Fund warned, adding that fighting a renewed world-wide downturn will be much more complex than it was in 2009, The Wall Street Journal reported. "Risks for a serious global slowdown are alarmingly high," said the IMF's World Economic Outlook report, which was released here Tuesday ahead of the fund's annual fall meeting. It was its bleakest assessment of global growth prospects since the 2009 recession.

A decision by Brazil's central bank to reduce reserve requirements for commercial banks was not motivated by the liquidation of troubled consumer lenders Banco Cruzeiro do Sul and Banco Prosper, a senior government official said on Thursday, Reuters reported. The bank lowered some requirements on deposits on Sept. 14, the same day it folded the banks for accounting fraud and losses. "The reserve requirements decision has nothing to do with the troubles facing some small banks.

Ecuador’s inability to borrow in international markets after its 2008 default is drawing the nation closer to China as the world’s largest commodities consumer grants loans in exchange for access to oil and metals, Bloomberg reported. Home to untapped copper reserves similar to those of Chile and Peru, the world’s top producers, Ecuador has signed loans for $7.3 billion from China since 2009, or about one-third of the Andean country’s annual budget, according to data compiled by Bloomberg based on government announcements.

Venezuela could default on its debt as early as the second half of 2013 if President Hugo Chavez wins re-election next month and fails to shore up the oil- producing nation’s “increasingly fragile” balance sheet, Morgan Stanley said, Bloomberg reported. One “tipping point” could be the $4.3 billion in external debt payments that come due between August and November 2013, Morgan Stanley analyst Daniel Volberg wrote in a note to clients today.

Brazil's central bank ordered the liquidation of Banco Cruzeiro do Sul on Friday after no one stepped up to acquire the troubled lender, raising doubts about government oversight of small- and mid-sized banks, Reuters reported. The central bank also ordered the closure of Banco Prosper, another small bank facing a liquidity crunch that Cruzeiro do Sul had agreed to take over last November. The decision follows three months of talks between Cruzeiro do Sul's creditors, investors and rival banks to cut mounting debts and find a buyer for the São Paulo-based lender.