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Argentine provinces face less revenue and higher rates because of YPF seizure

Thursday, May 17th 2012 - 11:52 UTC
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Chubut governor Martin Buzzi waiting for rates to fall before going to international markets Chubut governor Martin Buzzi waiting for rates to fall before going to international markets

Argentine provinces are falling back in paying salaries and honouring debts as they face a shortage of cash and almost record rates for issuing bonds in money markets, reports Buenos Aires financial press.

Chubut and Mendoza said they are waiting for rates to come down before going to money markets while Salta bonds yields have climbed 2.37 percentage points to 11.8% as a result of the uncertainty caused by the recent seizure of oil and gas corporation YPF from Spain’s Repsol and growing fears about President Cristina Fernandez ‘erratic’ economic policies.

Entre Rios and Santa Cruz had to delay paying salaries while Cordoba and Buenos Aires are floating bonds in Pesos in the domestic market.

Even when this is happening in Argentina, on average yields for Latin American bonds have been dropping further and countries were able to capture 48 billion dollars so far this year, indicate the reports.

“Investors who feel at ease taking Argentine risks are few and the market is still restless about the YPF situation” said Raymonod Zucaro from SW Asset Management LLC, Newport Beach, California. ”Provinces are being punished for decisions from the federal government”.

Argentina’s oil-richest province Chubut will attempt floating bonds in US dollars later in the year when the situation improves said Governor Martin Buzzi during a round of meetings in New York. Likewise Mendoza governor Francisco Perez is planning to sell 300 million dollars in bonds.

Buenos Aires province, the richest of the country is waiting for rates to drop before going to international markets, said Brian Joseph head of Puente Hermanos, a brokerage involved in selling local government bonds.

A slower growth of revenue plus the increase in costs have intensified concern about the finances of the Argentine provincial governments. Consultant Economia y Regiones estimates that this year the accumulated deficit of provinces could reach the equivalent of 4.3bn dollars, after paying interests, which is double last year’s shortfall.

“There are cracks in the economy and thus the revenue rate growth is falling”, said economist Veronica Sosa from Economia y Regiones. She anticipated that as soon as rates begin falling the provinces will try to issue bonds because they “really need the funds and could even be willing to offer higher yields than originally indicated”.

Top Comments

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  • JuanGabriel

    I suspect waiting for the rate to drop will be rather like waiting for the plastic in CFKs face to decompose.

    May 17th, 2012 - 12:07 pm 0
  • Teaboy2

    Delayed paying salaries - and some argentines here still try telling us their is no problem in argentina, guess their still getting paid on time whilst some are not.

    May 17th, 2012 - 12:25 pm 0
  • ChrisR

    Who in their right mind would by these bonds? You would never get any money back, especially as the economy is set to crash and burn within the next two years or so.

    You can just imagine the scenario of the new 'government' and their response to the question 'where is my money'. After pissing themselves with laughing they would say 'we did not issue these bonds or warrant their sale, IT WAS THE CFK GOVERNMENT. Just like the did over the Junta and the invasion of the Falklands (there are no Malvinas).

    Perhaps 'I don't Think' who says he lives in Chubut can sell his old watch and put that towards a bond.


    May 17th, 2012 - 12:34 pm 0
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