South America has been a special part of my life for four decades. I have lived many years in Brasil and Peru. I am married to an incredible lady from Argentina. I want to share South America with you.
Earlier this month Elena and I were in Lima, Peru. Were were talking to a dear friend Eduardo. He told us about the prison conditions that former President Fujimori has in Peru. Basically he does not serve time in prison. He is under house arrest on a military base. He has gourmet meals and wears nice civilian clothes. Staff and family can visit him as he wishes. His medical care is far better than most Peruvians get. The list goes on.
Likewise here in the US when former Panama President Manuel Noriega was in prison in Miami, he was on the grounds of a Federal prison. But he did not serve time with other inmates. He had his own private apartment with luxuries no other prisoner would dream of having. Family members and friends could come and visit him anytime that he wanted. He had all the latest newspapers and publications delivered to him each morning. As they say in English :"He did easy time."
Lula and Dilma are going to be arrested and found guilty of some corruption charges. Rest assured that the two ex-presidents will be housed away from other inmates and have a luxury life like the other ex-presidents mentioned above.
Argentina’s congress has cleared the way for the repayment of its “holdout” creditors and the end of a decade-long legal battle triggered by its 2001 default on $100bn of debt.
After a marathon 14-hour debate that ran into the early hours of Thursday, senators voted overwhelmingly to repeal laws that prevent Argentina from paying the holdouts, which rejected debt restructurings after the default.
If remaining legal hurdles are now cleared in the US — with a key court hearing in New York set for April 13 — Argentina will be able to make its long-awaited return to the international capital markets. First off would be a debt issue of up to $12.5bn to repay the holdouts, which would be led by US billionaire Paul Singer’s hedge fund, Elliott Management.
“This is a historic day,” said Gabriela Michetti, the vice-president, after the government’s proposal won the support of 54 senators, with only 16 voting against the law. She said the holdouts issue was like “a sword of Damocles hanging over our heads”. An end to the problem would enable Argentina to borrow at “much more reasonable interest rates” and to restore trust among the rest of the world, she added.
The legislation, passed by congress’s lower house earlier in March, was demanded by a New York court in order for injunctions to be lifted that prevented Argentina from paying bondholders with restructured debt, forcing Buenos Aires to default for the second time this century in 2014.
An end to the default would represent an important milestone for the centre-right administration of President Mauricio Macri, who was elected last year on promises to restore order and normality to Argentina’s struggling economy after 12 years of populist rule. It would allow the government to issue foreign debt to plug a gaping fiscal deficit without resorting to austerity measures or spurring inflation that is running at about 30 per cent.
Approval by Congress of the legislation marks a significant triumph for Mr Macri, whose “Let’s Change” coalition does not have a majority in either house. Although the opposition Peronist party controls 42 of the senate’s 72 seats, analysts say many opposition senators supported the government’s bill because of pressure from provincial governors who need access to credit to implement infrastructure projects that can reactivate regional economies.
“We have built 93 per cent of a bridge and if we don’t finish it, it will all have been for nothing,” said Miguel Ćngel Pichetto, who leads the senate’s Peronist block and voted in favour of the law. He was referring to the 93 per cent of creditors who accepted the restructuring deals in 2005 and 2010 of the previous Peronist government, pointing out that if agreements were not also reached with the holdouts then Argentina would remain starved of foreign investment.
If Argentina recovers its market access, economists estimate that the country — including regional governments and the private sector — could issue more than $30bn in debt this year.
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The image of President Obama held in a clinch by an Argentine tango dancer during his tour of Latin America has gone viral at just the right time for emerging markets.
In the next few weeks, Argentina is planning the largest and most anticipated sale of emerging market debt so far this year, and pictures of the US president in Buenos Aires will help to sell the story of a country resetting its relationship with the international capital markets after 15 years in the cold.
Who would buy bonds issued by a serial defaulter with a sizeable budget deficit and nagging inflation worries? Everyone, apparently.
After a shaky start to the year, markets are in resolute “risk-on” mode, which makes warnings of global investors losing interest in developing economies as the result of a strengthening US dollar, falling oil prices and China’s slowdown look premature.
Since the beginning of March, the MSCI Emerging Market index has gained 9.8 per cent, compared with 5.2 per cent for the MSCI World index, while the premium demanded by investors to hold emerging market bonds over supposedly safer debt has narrowed.
In total, the Washington-based Institute of International Finance calculates that overseas investors have poured close to $37bn into developing world stocks and bonds this month, the highest sum in almost two years.
Never mind that Argentina has defaulted eight times since independence; the country’s new market-friendly government has secured a deal with holdout creditors and emerging markets are rallying. The benchmark equity index is up more than 10 per cent this year while prices for existing bonds have jumped. The opportunity for a blockbuster bond sale in emerging markets has not been this attainable all year.
But there’s a catch. Pimco, the world’s largest bond manager, puts the rally in emerging markets down to three Cs: China, commodities and central banks.
As markets shake off the Easter lull, investors are focused on the next rate rise in the US.
Emerging markets may have breathed a sigh of relief on Tuesday as Federal Reserve chair Janet Yellen made the case for a slow rate rise, but if she changes her tune, then the rally — and Argentina’s hopes of an easy debt sale — could come to an abrupt end. Eye-catching photographs of Obama can’t compete with signals from Yellen.
elaine.moore@ft.com
Copyright The Financial Times Limited 2016. All rights reserved. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web.
All of this is incredibly positive for pure play Argentina focused oil plays like Madalena Energy (TSX:MVN OTC:MDLNF). Foreign direct investment means those like Madalena sitting on the huge oil reserves in the Vaca Muerta will be in for some JV or outright bids pretty soon.
Lets hope this new team can change the fate of this great and rich country. If they just could make everything more rational, fight some corruption then the country can rebound.
