International Monetary Fund officials are expected in Argentina this week to start negotiating with the new government of President Javier Milei on a $44 billion program that went off track during the previous administration, Bloomberg News reported. The delegation will arrive in Buenos Aires on Thursday, presidential spokesman Manuel Adorni said during his morning news conference Tuesday, without detailing who’s coming nor how long they’re expected to stay. Milei’s cabinet chief Nicolas Posse and Economy Minister Luis Caputo will lead talks with IMF staff, according to Adorni.
South America
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Colombia President Gustavo Petro has proposed lowering the country’s corporate tax rate and increasing income taxes for its highest earners, Bloomberg News reported. The move, which he has not yet detailed, would allow companies to grow and make the tax system more just, he said in a post on X on Saturday. Petro also spoke in broad terms about the tax reform proposal in remarks broadcast Friday after he announced that the government will increase the minimum wage by 12% next year.
Argentina’s President Javier Milei is considering issuing a perpetual bond to pay a $16 billion lawsuit award stemming from the nationalization of state-run energy company YPF, Bloomberg News reported. Swinging between political jabs and policy intentions, Milei suggested that the government would issue the bond without a fixed maturity while charging Argentines the “Kicillof tax,” named after Buenos Aires Governor Axel Kicillof who spearheaded efforts to nationalize YPF in 2012.
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Creditors of distressed Brazilian retailer Americanas SA approved a restructuring plan to overhaul 50 billion reais ($10.3 billion) of debt in a key step to applying a recovery plan nearly a year after its sudden implosion due to a multi-year fraud, Bloomberg News reported. With more than 97% of banks, bondholders and suppliers represented at the virtual meeting, the creditors gave the company the green light to proceed with the plan that envisions a capital injection of 24 billion reais in 2024 and recovery rates close to 30%.
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Chile’s central bank sped up the pace of its interest rate cuts with a reduction of three quarters of a percentage point and signaled borrowing costs could fall even faster as both inflation and the global economy improve, Bloomberg News reported. Policymakers led by Rosanna Costa voted unanimously to cut borrowing costs to 8.25% late on Tuesday, as expected by 12 of 20 analysts in a Bloomberg survey. Eight others expected a second straight reduction of 50 basis points.
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Economic activity in Brazil performed worse than expected in October, central bank data showed on Wednesday, corroborating broad readings of economic cooling, Reuters reported. The IBC-Br index, a key predictor of gross domestic product (GDP), fell by a seasonally adjusted 0.06% from September. On a non-seasonally adjusted basis, the IBC-Br was up 1.54% over October 2022 and grew by 2.19% in the 12 months. Latin America's largest economy has previously prospered this year on the strength of its agribusiness and extractive industries.
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Colombia delivered its first interest rate cut in three years, lowering borrowing costs by 25 basis points as signs of a faltering economy overtake inflation concerns, Bloomberg News reported. The central bank reduced its benchmark rate to 13%, Governor Leonardo Villar told reporters in Bogota after Tuesday’s policy meeting. The decision was backed by five of the bank’s seven board members, with two voting to keep the rate at 13.25%. Twelve of 22 economists surveyed by Bloomberg correctly forecast the move, while the rest expected interest rates to remain unchanged.
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S&P Global Ratings lifted Brazil’s credit score after the recent approval of an overhaul of the country’s tax code added to a series of economic reforms that have been implemented in the past few years, Bloomberg News reported. S&P raised Brazil’s sovereign rating by one notch to BB, two levels below investment grade, putting it on par with Guatemala and Dominican Republic. The outlook is stable.
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Argentina’s central bank changed its benchmark tool for monetary policy Monday, replacing four-week notes with one-day transactions in a bid to lower borrowing costs, Bloomberg News reported. The monetary authority will no longer auction its 28-day Leliq notes, which until now were used to determine its policy rate. Instead, the 1-day repo notes that currently pay an interest rate of 100% will serve as the bank’s new policy benchmark. Monday’s move aims to free up pesos for Argentine banks and strengthen demand for treasury notes.
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Argentina’s radical, anarcho-capitalist President Javier Milei may turn out to be pretty conventional. That comes with good and bad news for investors, the Wall Street Journal reported. Late on Tuesday, the country’s new government announced its first set of economic measures since Milei was sworn in. Economy Minister Luis Caputo said the peso’s official exchange rate against the U.S. dollar would be roughly halved and that public spending would be drastically reduced by cutting energy and transportation subsidies, canceling public works and reducing transfers to provinces.
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