Wednesday, November 21st 2012 - 21:18 UTC

Another Argentine province confirms ‘pesification’ of dollar-denominated bonds

Another Argentine province, Formosa announced that it would be repaying in Pesos its dollar-denominated bonds (FORM3) issued under local law, at an exchange rate of 4.81 Pesos per dollar.

The Central bank ‘dollar clamp’ is proving successful, so far

Formosa, which earlier this month followed in the footsteps of its Chaco neighbour when it “Pesified” its debt, on Tuesday sent a press release to the Buenos Aires Stock Exchange announcing the exchange rate it will use for the bond payment, which is due on November 27.

The decision to “Pesify” the payment was made during a meeting among bondholders, where modification of the bonds’ terms and conditions was agreed.

The FORM3 bonds were issued in 2008 under local law, for some 44 million dollars, and until this week paid a 5% annual interest rate, on February 27, May 27, August 27 and November 27 each year.

Formosa’s decision to “Pesify” debt follows in the heels of Chaco, which on October 3 decided to convert into Pesos the entire sum of its dollar-denominated debt, because, according to the province, the Central Bank did not allow it to access the foreign currency market.

At the time Chaco Governor Jorge Capitanich shocked the local public debt market when announcing the “Pesification” while urging other governors to do the same.

In related news the Argentine Central Bank on Tuesday 88 million dollars to supply private-sector demand for foreign currency, on a day which saw little movement between operators because of the national strike, while the official exchange rate closed at 4.82 Pesos. The wholesale dollar closed at 4.80 Pesos. On the informal market the so called ‘blue-dollar’ closed at 6.45 Pesos on Tuesday. In complicated transactions with the purpose of trying to get money out of Argentina, people have been prepared to pay up to 7.15 Pesos for the dollar.

The Central bank reported it has already bought 400 million dollars so far this month and 9.64 billion dollars in the year. But international reserves have dropped a billion dollars so far in 2012 to 45.335 billion dollars as at Monday.

Since a year ago the Argentine government has implemented a ‘dollar clamp’ to discourage residents from purchasing dollars to privilege imports and debt payments. But as the measures tighten, overseas tourism, savings in dollars, imports and the construction and real estate industries have suffered considerably.

The impact according to Buenos Aires City notaries has been particularly strong in the housing market and consequently the construction industry because in Argentina, for decades battered by inflation when not hyper inflation has opted for stable dollars as the currency to buy and sell property.

Although legally such transactions have not been banned the ‘dollar clamp’ has dried the market of greenbacks.

27 comments Feed

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1 LEPRecon (#) Nov 21st, 2012 - 09:31 pm Report abuse
But CFK PROMISED that all future bonds would be paid in US dollars!

But then again she can print as many Peso's as she needs, she has packed all the dollars into suitcases reay for the quick helicopter ride to Venezula!
2 CJvR (#) Nov 21st, 2012 - 09:49 pm Report abuse
It seems as if the Argie finances are in an even worse condition than suspected. They cant even cough up 44 million to pay a bond? Also if you are going to swindle the bond holders you could at least be honest enough to pay the correct $$$ exchange rate - it is just paper anyway...
3 ProRG_American (#) Nov 21st, 2012 - 11:12 pm Report abuse
1 LEPRecon (#) You are sddressing the federal bonds. The provinces do as they want.
By the way, the currency in argentina is pesos.
4 Ayayay (#) Nov 22nd, 2012 - 12:20 am Report abuse
What do the governors feel about all this?
5 CJvR (#) Nov 22nd, 2012 - 12:24 am Report abuse
@3 - “By the way, the currency in argentina is pesos.”

Then issue bonds in that currency instead, and good luck in finding buyers.
6 Ayayay (#) Nov 22nd, 2012 - 12:43 am Report abuse
Who WOULDN'T cash out now then?
Can the ordinary or lightly-incomed Argentine save in something stable online?
7 Captain Poppy (#) Nov 22nd, 2012 - 01:30 am Report abuse
The argentines need to get a royal screwing in order for them to get to the point of forcing a voilent overthrow. If not, after all this....the Argentines deserve all she takes from them.
8 yankeeboy (#) Nov 22nd, 2012 - 02:08 am Report abuse
Pretty sweet to pay about 1/2 of what is really owed considering the ”official rate is 4.8 and the going rate is closer to 8/1.
Filthy crooks.
9 KFC de Pollo (#) Nov 22nd, 2012 - 04:19 am Report abuse
are they even paying the full amount owed or were these already restructured?

if its the later, not only did they refuse to pay the full amount, they also rip off investors with false exchange rates!
10 Idlehands (#) Nov 22nd, 2012 - 09:41 am Report abuse
I assume all the bond holders are Argentine in this case?
11 Welsh Wizard (#) Nov 22nd, 2012 - 09:46 am Report abuse
CFK did onlymention federal bonds when she pormised paymetn in dollars. As for this, it technically isn't atechnical default as the bondholders agreed. Having said that, the meeting may well have been along the lines of. “We can't gethold of US$, we are going to pay you in pesos. If you don't accept you will get nothing”
12 Spainexpat (#) Nov 22nd, 2012 - 09:52 am Report abuse
And the NY court has lifted the stay on payments to holdouts and is directing Argentina to pay the amount owed into an escrow account so they don't defy the order. The judge cited the comments made by CFK and her cabinet. December is going to be very interesting.
13 agent999 (#) Nov 22nd, 2012 - 12:24 pm Report abuse
A bit of distraction.
Has anyone been to the telam “malvinas” site.

“Nor can we forget the unfortunate phrase of former President Carlos Menem, saying ”will reclaim the Falklands with fire and sword,“ then continued making effective policy dictatorship Madrid agreements thereby allowing scale exploitation of natural resources usurped by the British in the South Atlantic, the carnal and the umbrella of sovereignty, including Winnie the Pooh bears.”
14 Conqueror (#) Nov 22nd, 2012 - 02:13 pm Report abuse
@13 Either the Microsoft Translator is struggling or there is too much Spanish colloquialism. I was going to ask what it all meant. But then, as I read on, it turned out to be the usual lies and propaganda.

I find the article quite amusing. IN 30 years, has LatAm achieved anything? They scurry here, they scurry there, they spout their lies. And then, in one relatively short statement, the Secretary General of the United Nations explodes their house of cards. “Self-determination” he says. “The UK has not breached any UN resolutions” he says. Time for the “malvinistas” to do something useful with their lives. Instead of bothering honest Brits and Falkland Islanders with their bigoty and xenophobia!
15 Welsh Wizard (#) Nov 22nd, 2012 - 02:17 pm Report abuse

Interesting, have you got a link to the story. Are you saying that the courts have directed ALL paying (negotiated and holdouts), to be paid into 3rd party escrow so that the banks aren't in defiance of the order and thei obligations under the bond docs?
16 Idlehands (#) Nov 22nd, 2012 - 02:37 pm Report abuse
The latest as of today:
17 ChrisR (#) Nov 22nd, 2012 - 03:21 pm Report abuse
From the link @16

“”It is the view of the District Court that these threats of defiance [by Argentina] cannot go by unheeded, and that action is called for,“ the judge's order said. ”The less time Argentina is given to devise means for evasion, the more assurance there is against such evasion.“”

How exasperated must the few million honest Argentines (such as Simon68 & others) feel with their crooked government when they see statements like this.

And every power to the judge, who, it seems at last, has come up with a form of words that should make AG pay ALL bondholders what they are rightly due.

If anyone outside of AG is contemplating investing dollars in AG I would imagine their colleagues / families would have excellent grounds to have them declared incompetent within the meaning of contract law.
18 Welsh Wizard (#) Nov 22nd, 2012 - 04:10 pm Report abuse

Cheers. Thought this would happen and they would cast the net very wide...
19 Nostrolldamus The 2nd (#) Nov 22nd, 2012 - 04:13 pm Report abuse
“Pretty sweet to pay about 1/2 of what is really owed considering the ”official rate is 4.8 and the going rate is closer to 8/1.
Filthy crooks.”

“...Nobody doubted the clarity of this ”gold clause“ provision or the intent of both the debtor, the U.S. Treasury, and the creditors, the bond buyers, that the bondholders be protected against the depreciation of paper currency by the government.

Unfortunately for the bondholders, when President Roosevelt and the Congress decided that it was a good idea to depreciate the currency in the economic crisis of the time, they also decided not to honor their unambiguous obligation to pay in gold...”

USA deabeats, pay the gold you confiscated and that you owe by renening on your promises!
20 Simon68 (#) Nov 22nd, 2012 - 04:27 pm Report abuse
17 ChrisR (#)
Nov 22nd, 2012 - 03:21 pm

Exasperated is an understatement for what I personally feel about this whole sorry episode. I'm sure that the usual culprits will start bashing me for being a “cipayo”, “vendepatria” and a traitor, but seriously the humilliation that this government has poured upon the Argentine people over this business is incredible.

Since 2004 these ghastly people who have been “ruling” my poor country have been saying that our economy was growing at “tasa chinas” why the hell didn't we pay of the bondholders while we had the money??????

If we had done that, we would be able to get loans to enable YPF to start exploiting Vaca Muerta and possibly within a a couple of years get back to being self sufficient in energy, but no, the stupid government has to rule by emotion and so we are once again at the door to default, but this time WE are the bondholders!!!!!!

Well done the 54% of idiots who supposedly voted for CFK, once more “fracaso de- sastre argentino.”
21 ChrisR (#) Nov 22nd, 2012 - 06:55 pm Report abuse
20 Simon68

You have my sincere best wishes towards you and your extended family.

I just wish I could do more.
22 ptolemy (#) Nov 22nd, 2012 - 11:32 pm Report abuse
19 Nostrolldamus The 2nd

..facts mixed with speculation and lies. Trying for distarction?
23 Ayayay (#) Nov 23rd, 2012 - 01:46 am Report abuse
I think if the news stories didn't constantly focus on money & governance, but more on family, sex ;), love, and , we could get in a few words finally about what makes Argentines so SPECIALbeauty!
24 British_Kirchnerist (#) Nov 24th, 2012 - 01:08 am Report abuse
The more pesification the better, Argentina must strengthen and make credible its own currency to avoid being kicked about by the dollar...
25 ChrisR (#) Nov 24th, 2012 - 10:51 am Report abuse
@24 BSK

You really DON'T understand anything about finance in the real world do you?

Yes, I want them to carry on with this stupidity because it will rebound on TMBOA faster than Nestor’s penis on their honeymoon and that will be the finish of her if nothing before does it.
26 British_Kirchnerist (#) Nov 24th, 2012 - 11:41 pm Report abuse
You do have a way with words, I'll give you that...
27 St.John (#) Nov 25th, 2012 - 03:07 am Report abuse

you are a sensible person.

I have tried to persuade my Argentino friends to join political party (any party), but they just shrug and say “this is Argentina”.

Can you explain why the Argentinos don't join the parties and throw the rotten candidates out?

Why do they prefer 'Viveza Criolla'?

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