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Billions pour in to buy Argentine bonds, “sign of growing investor confidence”

Monday, October 24th 2016 - 17:43 UTC
Full article 9 comments

Argentina’s international currency reserves rose above the landmark US$40 billion for the first time in three and a half years last Friday, as a huge inflow of dollars from government-issued debt and some exports over the last few days caused some dramatic increases this week. The milestone, according to Central Bank chief Federico Sturzenegger, was “a sign of growing investor confidence in the country.” Read full article


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  • Briton

    Billions pour in to buy Argentine bonds,

    Shaken but not stirred, and debts to be repaid.

    Oct 24th, 2016 - 08:12 pm - Link - Report abuse +1
  • Marti Llazo

    article: “ According to the Argentine government this “historic” sum was possible because an estimated US$ 3.8bn from international foreign investors came into Argentina. ”

    --- Then the government is lying again. So far this year more than US$20 billion has been raised from bond sales on the international market, and those “ dollar reserves” are needed to cover the increasing high-interest debt that Argentina has taken on. An earlier set of dollar-denominated treasury bonds here this year are paying 18 percent interest and a more recent issue is at more than 15 percent. And then there is the additional euro-denominated debt this year. Ask yourself where Argentina is going to get the money to service that sort of interest while it is paying foreign journalists to hype the apparent dollars looking like “reserves” in the central bank here.

    All while the country is making no real progress in actually producing additional goods and services, while poor productivity and high tax rates coupled with the effects of corruption, deteriorated infrastructure, and bureaucracy are stifling any chances for improved competitiveness. They're probably expecting some sort of deus ex machina.

    Oct 24th, 2016 - 08:26 pm - Link - Report abuse +1
  • Briton

    Marti Llazo
    you may well be right,
    does this then prove that the new government is as corrupt as the old one, in part anyway.

    Oct 24th, 2016 - 08:31 pm - Link - Report abuse 0
  • Marti Llazo

    From here the new government does not appear to be quite as corrupt, but neither is it totally honest nor competent, despite what the popular international media are trying to present. Remember that this is still Argentina and we can't expect any serious meaningful beneficial change for many years, if then. What has changed is actually very little. And what the new government really suffers from is inexperience along with the counterproductive momentum of decades of cultural effects. That, and nobody in their right mind has any reason to trust Argentina.

    Oct 24th, 2016 - 09:25 pm - Link - Report abuse 0
  • golfcronie

    And here I thought that he took over the government in Dec 2015, God how time flies.

    Oct 24th, 2016 - 09:32 pm - Link - Report abuse 0
  • Enrique Massot

    The Macri government has so far financed everything with debt, which has been possible because of the low levels of indebtedness left by the CFK government. The citizens' buying power, meanwhile, has been consistently eroded, as it has the small and medium-size enterprises.
    All perfect-storm ingredients leading to the next monumental crisis if the current direction is kept.

    Oct 25th, 2016 - 06:36 pm - Link - Report abuse -1
  • Marti Llazo

    “ the low levels of indebtedness left by the CFK government.”

    Actually the CFK government ended with more debt than it started with, and essentially emptied the coffers as it left. The Secretaría de Finanzas numbers show that during the last KK year, 2015, the national debt here grew by US$18.3 billion, which represented more than 45% of the gross national product. But the KK followers still believe the myth of some sort of “desendeudamiento.”

    The KK also left another sort of debt, in the form of low-value make-work projects underway for which there were no funding sources, as well as leaving sectors such as Aerolineas operating in enormous debt, and much of the infrastructure in near-ruins. Another expensive legacy of the KK era involves the high taxation costs we still have here.

    The erosion of buying power now is essentially the same as that which existed during the KK era, with about the same inflation and wage-adjustment rates, though the latter varies by sector. The decline of the PYMEs has been underway for a long time and is the result of many factors, including their own inefficiencies and lack of adaptation for competitiveness, and low worker productivity. But the PMYEs also suffer from high labour costs that resulted from the KK governments, a regional recession, high levels of taxation, and the burdens of bureaucracy, crime, and corruption. We still have a VAT of 21 percent and employers pay a social security tax of 27 percent, which discourages hiring of new employees. Very little has changed that is providing near-term benefits and I still expect a “significant nonpayment event” involving foreign debt, within 5 years. Argentina isn't going anywhere, and it doesn't matter who is running the current show.

    Oct 25th, 2016 - 08:58 pm - Link - Report abuse +3
  • ChrisR

    Who are these stupid 'investors' other than international banks, who when the investment is not repaid, will charge the lot to their then customers? Just like last time and the time before that, and the time before that, add infinitum.

    Oct 26th, 2016 - 11:31 am - Link - Report abuse 0
  • Marti Llazo

    According to one of our fund managers, a lot of this Argentine paper is being bought up for resale with commissions in a couple of categories. One is certainly advertised to customers as high-return/high-risk and at least some of those sellers are honest about the risks. Others are less so and may either fail to do their homework on comparable performance in Argentina, or bury the risk details in the small print. There is no question that with a little manipulation, even Argentine bonds can be made to look good on paper, especially for the inexperienced or careless small investor buying fund mixes in which Argentina is just one player. And if you can make some money in reselling, and hype the high-interest carrot in front of those willing to take understated risks, then those commission-fed resellers are going to do what they do. Right now yields on so many other opportunities are rather low and many investors are willing to take higher risk rather than default to making almost nothing at all on more-stable positions. Right now Argentina is selling debt right and left, not only through national/sovereign debt but also the provinces are selling their own bonds and at sometimes very attractive rates. And all that debt-selling at somewhat high interest is producing unsustainable repayment conditions since the country is a seething cauldron of liabilities, and despite the hype, no really serious growth prospects in sight. Remember that Argentina is borrowing money to pay interest on its increasing debt while the viability of most sectors of its fragile economy is seriously in doubt. This will not end well.

    Oct 26th, 2016 - 01:18 pm - Link - Report abuse +1

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