South America

Colombia’s rapid recovery and growing inflationary pressure mean the central bank will need to pare back the amount of stimulus it’s providing the economy, bank Governor Leonardo Villar said, Bloomberg News reported. “We saw the need to begin reducing the magnitude of stimulus,” Villar said in a presentation Thursday, referring to the central bank board’s discussion in its last policy meeting in July. “That doesn’t mean eliminating stimulus altogether.” The bank will begin to lift interest rates “gradually”, he said, without specifying when it will start.

Ecuador has reached a new staff-level agreement with the IMF that could result in $1.5 billion in new disbursements this year following promises by President Guillermo Lasso's government to cut spending, the finance minister said on Wednesday, Reuters reported. The South American nation last year struck a $6.5 billion deal with the multilateral lender to help revive an economy that for years struggled under low oil prices and was further weakened by a brutal coronavirus outbreak.

Shares of Avianca Holdings SA have tumbled 45% over the past week as the Colombian airline prepares a bankruptcy exit plan that will likely make the stock worthless, Bloomberg News reported. The air carrier, which was driven into chapter 11 during last year’s pandemic and travel bans, fell 6% in Bogota trading Monday, extending losses for a fifth day, according to data compiled by Bloomberg. Shares were trading around 119 pesos (about 3 cents) on Monday. A U.S.

Molino Cañuelas, one of Argentina's leading food producers, has filed for the local equivalent of Chapter 11 after years of disputes with creditors, the Buenos Aires Times reported. Molca, as the company is known in Argentina, could not reach an agreement with creditor financial institutions, so it was forced to request the opening of bankruptcy proceedings, the firm reported in a statement sent by email via an outsourced public relations firm. The company owes US$1.4 billion to domestic and foreign debtors, including ING Groep NV and Rabobank UA, a spokeswoman confirmed.

Axel Kicillof, the outspoken governor of Buenos Aires, called journalists to one of the province’s opulent 19th-century mansions and conceded defeat. It was early 2020, just weeks before the pandemic hit, and Kicillof, a man reviled in investing circles for his brash negotiating style when he was economy minister during Argentina’s default a decade ago, was once again doing battle with creditors. This time around, he lamented bondholders’ “enormous intransigence” in refusing his province’s request to delay a $250 million bond payment.

Argentina’s Province of Buenos Aires says it received creditor support to restructure 98% of its $7.1 billion in overseas debt, putting it a step closer to ending a 16-month default, Bloomberg News reported. The province, which is Argentina’s largest and most populous, will swap all of the bonds it had offered to exchange except for dollar-denominated notes due 2021 and euro-denominated bonds due 2020, which had been issued under indentures that required a higher amount of creditor participation, according to a statement. The deal is expected to settle Sept. 3.

Brazil Economy Minister Paulo Guedes said on Monday he agrees with the solution proposed by the president of the Supreme Court, Luiz Fux, for payment of court-awarded debt owed by the government, Reuters reported. The Supreme Court proposed last week that instead of paying the debt in installments, the government make sure the volume of payments does not exceed the budget spending ceiling. The proposal would reduce by around 50 billion reais ($9.6 billion) the total amount the government would have to pay next year.

Paraguay will continue to dial back pandemic stimulus next year as a fast growing economy cushions austerity measures that have proved unpopular in other South American countries, Bloomberg News reported. The government has already reduced temporary pandemic cash transfers to people working in the country’s vast informal sector without triggering social unrest, Finance Minister Oscar Llamosas said in an interview. “The task of adjusting fiscal accounts was largely done this year, and the idea is to continue that in next year’s budget,” Llamosas said.

A majority of Brazil’s Supreme Court justices have voted to uphold the constitutionality of a law granting the central bank formal autonomy, a key piece of legislation considered by investors as a victory for monetary policy making in Latin America’s largest economy, Bloomberg News reported. Eight justices voted in support of the law on Thursday, and two against.

Brazil's Supreme Court will debate on Wednesday whether a law to establish the autonomy of the central bank, insulating it from political interference, is constitutional or not, Reuters reported. The law does not change the way the bank sets interest rates but distances it from politics by setting fixed four-year terms for its governor and directors that will no longer coincide with the presidential election cycle. Far-right President Jair Bolsonaro signed the measure into law in February, but two left-wing parties have questioned whether it violates the country's constitution.