mead cohen berger shevtsova garfinkle michta grygiel blankenhorn
Argentina Free Fall
SCOTUS vs. Kirchnerismo

Argentina’s government is trying to load on the heavy cosmetic treatment, as tightened currency controls have worsened rather than slowed a free fall in the country’s international reserves and in the performance of the peso. The administration of President Cristina Fernandez de Kirchner is hoping to bring the official and parallel exchange rates closer together by selling the nationalized pension industry’s bonds, in yet another iteration of Argentina’s scramble to pick up the pieces after years of disastrous economic policies. Bloomberg reports:

Argentina’s state pension fund sold government dollar bonds due 2018 to local investors yesterday for the first time in a bid to strengthen the peso in the so-called blue-chip swap market.

The agency, known as Anses, sold $2.7 million of the notes which were issued in a private placement in 2011, according to data compiled by the Buenos Aires Stock Exchange. The sale into the secondary market helped strengthen the implied peso rate to 9.17 per dollar from 9.31 a day earlier. Investors use the blue-chip swap market to obtain foreign currency by exchanging peso-denominated assets for dollar assets at a rate that is about 38 percent weaker than the official rate of 6.6246.

“This signals a greater intervention in the foreign exchange market at the cost of not selling the bonds abroad to accumulate reserves,” Alejo Costa, head of research at Puente Hnos Sociedad De Bolsa SA in Buenos Aires, said in an e-mail.

2014 is a big year for Argentina. History gives us little reason to think the country’s ruinous pattern of “alternative” economic models will lead to anything in the short-term other than the reemergence of black market money changers, or in the long-term other than yet another “unconventional” solution. But this could be a banner year in Argentina’s manic-depressive economic history: the US Supreme Court has agreed to hear Argentina’s appeal of an appeals court decision that Argentina must repay its creditors in full. Argentina is hoping the Supreme Court will rule that bondholders who declined to participate in the debt exchanges don’t need to be paid at all, but if not, Argentina could be facing its second multi billion dollar default in just over a decade. All this as inflation continues to rise, capital flees, and strikes, riots, looting and blackouts spread.

We’re only a few weeks into 2014, but things already aren’t looking good for one of 2013’s biggest losers.

Features Icon
show comments
  • Kevin

    What’s shocking us that anyone buys Argentine bonds. How stupid or desperate do you gave to be to do that? I would love to know the thinking behind those who buy these.

  • PKCasimir

    The US Supreme Court has not, repeat not, agreed to hear Argentina’s appeal of an appeals court Decision that it must repay its creditors in full. What the Supreme Court has agreed to review is a court’s order requiring a bank to turn over information about the country’s assets to bondholders who have refused to accept Argentina’s settlement of its defaulted bonds so that it may attempt to get court orders to seize the assets. The Supreme Court has not decided to review the much more important case that would force an Argentinian default, although it well might at some future date.

  • ljgude

    When looking at economic troubles south of the border I see a different relationship between these societies and their land. Many countries – Mexico and Argentina come to mind, where there are large land holdings by a relatively small elite. The Church has an acre or two also I believe. Then I think of Henry the VIII who confiscated the Church lands. My pet theory is that capital flows were loosened up and things happened quickly. His daughter turned England from a third rate power into a first rate one. There was both opportunity and Robber Barons like Drake to take advantage of it. The capital is still flowing at a pretty good clip in the Anglosphere thanks to Henry and those in the Hispanosphere who don’t have hereditary wealth or even a hereditary union job are still coming el Norte for the crumbs the Anglos don’t want. We have our own problems. A national government with both parties corrupted by Wall St and other interests and a disintermediated Blue Social Model that is making escalating sucking sounds. But…Don’t cry for me Argentina. (sorry)

    • El Gringo

      Despite it’s drug cartel issues, Mexico is doing quite well economically. Lumping Mexico and Argentina together is a false comparison.

© The American Interest LLC 2005-2016 About Us Masthead Submissions Advertise Customer Service