South America

Bonds issued by the province of Buenos Aires fell sharply on Monday after a minister in the national government said the state would not come to its aid in making a big debt payment due at the end of this month, setting investors on alert for tough negotiations over the country’s sovereign debt, the Financial Times reported. Debt backed by Argentina’s most populous province and set to mature in 2021 fell over 10 per cent to 62 cents on the dollar. Another bond maturing in 2027 saw its price slip about 3 per cent to 44 cents, while government debt prices also wobbled.

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President Alberto Fernandez said he has set a March 31 deadline to renegotiate Argentina’s rampant public debt and that a more “innovative” International Monetary Fund approves of the direction his government is taking, Reuters reported. Argentina is in talks with bondholders and other creditors to restructure about $100 billion in debt, among them the IMF to whom it owes about $44 billion. “I think that from here to March 31 our trajectory is going to be very clear,” Fernandez said in an interview published on Sunday by the online news site El Cohete A La Luna.

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Buenos Aires’s plan to seek talks with creditors ahead of a debt payment due this month has torpedoed one of the world’s best bond rallies, Bloomberg News reported. The province’s $500 million of notes due in January 2021 tumbled 5.3 cents Wednesday to 64 cents on the dollar, their worst day in more than four months. The securities had returned 54% from the end of August through Tuesday, putting them among the top performers in emerging markets.

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Argentina’s new central bank president pledged to further cut interest rates to boost a free-falling economy while fighting inflation through a “social pact” that would encourage companies to raise production rather than prices, Bloomberg News reported. Miguel Pesce said he expects the key rate floor to fall again in January after two cuts last month. At 55%, the benchmark rate is still the world’s highest, although considerably lower than the September peak of 85% recorded under his predecessor.

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S&P Global Ratings raised its debt grade for Argentina on Tuesday, acknowledging the agency made a mistake when it changed the rating in late December for the crisis hit country, The Business Times reported. S&P bumped the rating on foreign long-term debt to 'CCC-' from 'CC,' taking it up two notches from 'SD' and back to where it was prior to December 20 when the country was declared in default. After bumping the rating up a notch on December 30, 2019, "we identified that we had misapplied our criteria," S&P said in a statement.

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Samarco Mineracao SA has rejected creditors’ formal request to resume talks to restructure its defaulted debt, signaling heightened risks for bond holders, according to people with direct knowledge of the situation, Bloomberg News reported. The Brazilian iron ore venture between BHP Group and Vale SA said it has yet to firm up its business plan. And without that, the company argues that it will be at a disadvantage if it were to resume talks that have been put on hold for almost a year on its $2.9 billion in defaulted debt, the people said.

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Sovereign debt’s bad boy is back. Argentina, the eight-time defaulter, is on the hook for around $100 billion of hard currency debt held in private hands, just part of its hefty borrowings, Reuters reported in a commentary. The International Monetary Fund may complicate new President Alberto Fernandez’s plans for a quick debt fix, with wonky new bond features making the outcome even chancier than usual. The dwindling liquid cash reported by the country’s treasury won’t even cover next year’s roughly $10 billion in private-lender interest, let alone principal.

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Argentina’s new government announced the issuance of $1.326 billion of dollar-denominated Treasury Bills, to be directly subscribed by the central bank, according to a decree in the official Gazette on Thursday. The issuance of the 10-year debt comes as the country’s new Peronist President Alberto Fernandez looks to pay off creditors and stave off a damaging default, Reuters reported.

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Argentina’s new President Alberto Fernandez said on Thursday that a social pact with businesses and trade unions sent a “strong message” to creditors including the IMF that the economy must be allowed to grow before the country can pay its debts, Reuters reported. The broad agreement struck last week, a core plank of the new Peronist administration’s plans to revive the economy and rein in inflation, gives Fernandez extra muscle in looming restructuring talks over around $100 billion in debt.

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Most countries have a historic villain. For Cuba, it is Uncle Sam. For some in the Middle East, it is Israel. Here in Argentina, many direct their rage at the International Monetary Fund, The Wall Street Journal reported in a commentary. Hating on the multilateral lender, which steps in to bail out indebted governments, is something close to a national sport in this country of 44 million.

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