South America

Argentina has undone a huge amount of positive work done in reaching an agreement to restructure its debt through its financial mismanagement and the government only has itself to blame, according to Raphael Kassin, Citywire reported. Emerging market debt veteran Kassin made the comments during the most recent episode of our sister publication Citywire Selector’s EM Insider podcast.

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Argentina’s wide gap between its official peso spot rate and closely watched prices of the currency in alternative and black markets has narrowed amid signals the central bank will tighten its funding of government spending, Reuters reported. The gap between the peso rates has soared this year amid tight controls on access to dollars, concerns over the economy and money printing to pay for the indebted country’s emergency response to the COVID-19 pandemic. But since a peak around Oct.

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President Jair Bolsonaro’s stimulus spending spree won praise far and wide for saving Brazilians from the worst of the pandemic’s economic pain. But now, as the worst of the health crisis eases, anxiety is mounting in financial circles about how he’s going to pay for it, Bloomberg News reported. Investors have been unloading the currency and stocks, sparking routs that are almost unparalleled in the world this year, and they’re increasingly refusing to buy anything but the shortest of short-term government bonds.

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Sovereign default risks are on course to rise further in 2021, with Iraq, Sri Lanka, Angola and Gabon at high probability of default, say Goldman Sachs analysts, Reuters reported. Five sovereign debt defaults or distressed debt exchanges - in which investors swap their debt for new bonds, often with longer maturities and a reduced value - have already happened in 2020 in the aftermath of the COVID-19 crisis, the most in around two decades.

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Some of Argentina’s biggest bondholders have issued a sharp rebuke to the government over its handling of the country’s deteriorating economic situation, just a few months after reaching a compromise to restructure $65bn worth of debt, the Financial Times reported. In a statement released on Thursday, two creditor groups at the heart of the recent negotiations to resolve Argentina’s unsustainable debt burden accused the government of putting forward policies that “undermine” its own economic recovery, such as its recent decision to tighten capital controls.

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Suriname said on Thursday it wanted to make use of a 30-day grace period on its dollar-bond coupon payments coming due on Oct. 26 to engage with creditors to tackle its debt sustainability issues, Reuters reported. Indicating that it might not pay the coupon due on Monday, the government said in a statement it had invited all its commercial creditors to an investor presentation on Oct. 30. “Public debt has risen to historical levels and borrowing continued even as severe macroeconomic and financial imbalances were building up,” the government of the South American nation said.

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Argentine bondholder groups slammed the government on Thursday over economic policies they said were undermining investor confidence in the country, which emerged from a sovereign default in September after a $65 billion restructuring, Reuters reported. Two of the groups involved in that debt revamp said in a statement that policies since then had “failed to restore confidence” and instead had “dramatically worsened the country’s economic crisis.” Bond prices have dropped sharply since the exchange.

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Investors are giving up on Argentina just six weeks after it pulled off a $65 billion restructuring, Bloomberg News reported. The country’s overseas bonds have plummeted more than 20% since early September, the world’s biggest drop in that span. Morgan Stanley calls it the worst rout in the aftermath of a restructuring in at least 20 years, and it comes despite the nation winning a whopping $38 billion of debt relief from creditors. Those same investors have been dismayed at what followed.

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The government of Venezuelan President Nicolas Maduro is approaching some of the nation’s creditors in a bid to lay the groundwork for a debt deal should sanctions ease after next month’s U.S. election, Bloomberg News reported. His team has convened phone calls with local bondholders in the past few weeks, as well as those from Colombia, Argentina and Europe, according to people familiar with the matter. Prominent investors such as Boston-based Fidelity Investments; Goldman Sachs Group Inc. and BlackRock Inc.

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