South America

Argentine President Alberto Fernandez has likened negotiating the nation’s debt to playing poker. This week he’ll have to show some of his cards to the International Monetary Fund, Bloomberg News reported. IMF negotiators land in Buenos Aires on Wednesday for their first mission since the leftist president took office in December. Before agreeing to any changes in the terms of their current deal, they will want to see Fernandez’s blueprint for tackling more than $320 billion in total debt and for rescuing an economy that’s forecast to shrink for a third straight year.

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Argentina said it won’t make a local bond payment on time after failing to refinance the debt, declaring it won’t be “held hostage” by foreign investors demanding their money back, Bloomberg News reported. The maturity date for the note will be delayed to Sept. 30 from the original Feb. 13, the Economy Ministry said in a statement. The move comes after a local debt sale flopped and only a few investors agreed to participate in a debt swap that would have bought the country extra time to come up with the cash.

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Argentina’s top exporter of processed soy, Vicentin, has asked a judge to begin negotiations for debt restructuring, the company said on Monday, as the firm struggles to cope with a widening economic crisis in the South American nation, Reuters reported. The near 90-year-old firm, which defaulted on payments to suppliers late last year, was forced to sell part of its stake in a joint venture with Glencore in December, as its plans for expansion collided with Argentine financial woes.

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After decades of dominating its oil industry, the Venezuelan government is quietly surrendering control to foreign companies in a desperate bid to keep the economy afloat and hold on to power, the International New York Times reported. The opening is a startling reversal for Venezuela, breaking decades of state command over its crude reserves, the world’s biggest. The government’s power and legitimacy have always rested on its ability to control its oil fields — the backbone of the country’s economy — and use their profits for the benefit of its people.

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The IMF is like a hospital emergency room. Countries abhor the fund’s demands to adjust their economic policies in return for loans, so they only walk in when an accident makes them lose access to private capital, the Financial Times reported. The IMF imposes conditionality because its interest rates are fixed and cannot reflect the borrower’s risk — it is lending the taxpayers’ money of member countries. The “injured” country is requested to reduce spending and raise taxes. When fiscal changes cannot re-establish debt sustainability, it is also asked to restructure its debt.

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Brazil construction company Odebrecht SA has taken Peru to arbitration over a failed $2 billion investment in a gas pipeline, arguing it needs to recoup the money to pay debtors in order to navigate its own bankruptcy restructuring, Reuters reported. Odebrecht, which announced the move on Wednesday, is in a precarious financial situation due to the revelation of its participation in a complex scheme to exchange bribes for public work contracts throughout Latin America. Peru’s prosecutorial agency did not return a request for comment on Wednesday.

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Brazilian construction giant Odebrecht SA has agreed to extend the monitorship and other terms of its plea agreement with the U.S. Justice Department for almost nine months, according to court filings, The Wall Street Journal reported. Odebrecht pleaded guilty in 2016 to a criminal charge of allegedly conspiring to violate U.S. foreign bribery laws and entered into a plea agreement with the DOJ.

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Fidelity Investments scored a victory over the province of Buenos Aires by compelling officials there to make good on a $250 million payment they had threatened to withhold, Bloomberg News reported. The Boston-based fund manager rejected the province’s demands for a three-month delay for the payment originally due in January, even as officials said there was no way the cash-strapped province could make good on its obligations. Fidelity’s outsize stake means it was effectively able to block the proposal, and in the end the province agreed to pay.

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Argentina’s province of Buenos Aires narrowly avoided defaulting on its debt on Tuesday, agreeing to make good on an overdue payment originally due in January and announcing it would begin restructuring its debt burden, the Financial Times reported. Axel Kicillof, the governor of Argentina’s most populous province, said his government would pay holders of a bond maturing in 2021 the $250m they were owed, and start the process of restructuring its remaining stock of foreign debt.

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A month after Argentine President Alberto Fernandez took office, economists and investors still don’t know how he plans to dig his way out of a $311 billion debt hole and kick-start growth. They only know a when, Bloomberg News reported. His government last week laid out an ambitious timeline for debt talks that it aims to wrap up by the end of March. While light on detail and deserving of skepticism, it offers at least an inkling of a plan from a president and economic team that have so far eschewed any sort of big picture road-map.

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