Argentina’s Massive Anti-Government Demonstrations [armstrongeconomics]

Argentina seized all pensions. The people are getting to the point that all this socialism is really fascism. Those who keep pointing to hyperinflation better start looking in the opposite direction. Economics is like weather – you can die from too much heat or too much cold – both extremes will kill you. Hyperinflation is the nice way where politicians really try to meet their obligations because they care. Then there is the nasty way. The cling to authority, seize everything, lie, abandon every promise, and default pretending it is your own fault never their’s. This is a battle between the bondholders and the taxpayers every place you look. This is the Sovereign Debt Crisis in bloom around the globe.

There is a way out. We will be making available soon the video from the Sovereign Debt Crisis and will put on Amazon.

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Financial repression 101 [SoberLook]

Sign says: “Christina don’t **** with democracy”.

Source: The Nation

That’s exactly what Christina Fernández de Kirchne’s government has been doing for some time.

The Nation: – Among several reasons for these accusations could be the country’s current inflation rate (estimated by economists to be 26 percent, while the government cites it as 11.1 percent); the state’s assumption of control of private pension funds valued at 30 billion; the government’s restrictions on currency exchange, making it difficult for citizens to travel outside of Argentina; restricted freedom of speech; and, most significantly, an accusation of widespread corruption.

Argentina’s actions don’t just threaten the nation’s democratic system. The latest policies amount to a harsh form of financial repression that will bring the nation’s private sector to its knees. As confidence in Argentina’s stability deteriorates, foreign reserves are becoming dangerously low. The latest move to close any loopholes that allowed outflows of dollars from the country is now impacting domestic market liquidity.

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Argentina’s downward spiral [SoberLook]

The government’s mishandling of Argentina’s economy has hit new highs recently with the implementation of price controls on food. It is a notoriously ineffective policy that tends to create shortages and spawns black markets.

International Affairs Review: – President Cristina Fernández de Kirchner’s temporary price freeze on food products marks the most recent instance of her gross mishandling of Argentina’s economy. The price freeze applies to all major food retailers, which account for over 70% of the market. Historically, these types of economic policies have never produced positive results. Most often, food importers stop importing because they would lose money by selling their food at the prices ordered by the government. Customers of large retailers who stand in line hoping to buy at the frozen price will then find the shelves barren. This scarcity of goods will spawn a black market, where food will be sold at actual market prices. While some law enforcement officials may tolerate these black markets, other will try to dismantle them, only to discover more tenacious entrepreneurs setting up shop the next corner over.

Unfortunately, the temporary price freeze is only part of an alarming trend towards financial mismanagement, which includes the expropriation of major foreign investments. Last year’s nationalization of Repsol YPF has infuriated Spain, one of Argentina’s largest foreign investors. Kirchner’s presidency has also been marred by accusations of falsifying CPI statistics (which provoked a strong rebuke from the IMF), a weakening of central bank independence, use of the nation’s currency reserves for political payoffs, and the threat of default on its debt – again. To most outsiders it would appear that Argentina is repeating many of the mistakes that resulted in its economic crisis of the early 2000s.

In a classic case of “wag the dog”, Argentina’s government is trying to focus the population on external issues. Argentine officials are now taking an aggressive stance with respect to self-determination in the Falkland Islands. Knowing that the upcoming referendum will likely result in a status quo, Argentina’s government declared the vote to be “illegal”. Tensions with the UK are likely to escalate further.


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Argentina Default Swaps Traders Lose 81% as Risk Recedes [Bloomberg]

Traders who bought three-month protection against an Argentine default lost 81 percent of their money in the two days after a U.S. court delayed a ruling that could have blocked payments to bondholders.

The cost to insure $10 million of Argentine debt against non-payment through March has plunged to $651,389 from $3.5 million on Nov. 28, according to SW Asset Management LLC. The selloff came after a U.S. federal appeals court stayed District Judge Thomas Griesa’s decision that would have forced the country to pay so-called holdout creditors from its $95 billion default in 2001 before holders of its restructured bonds.

Speculation that Argentina would opt to default for a second time in 11 years rather than settle with the holdouts caused the nation’s bonds to tumble by the most in emerging markets last month. While President Cristina Fernandez de Kirchner says her country will pay its performing debt, she has vowed never to give in to the demands of investors including billionaire Paul Singer she has dubbed “vultures.” Argentina is still more likely to renege on payments than any country in the world, according to the credit-default swaps trading.

Swaps Traders Lose 81% as Default Risk Recedes: Argentina Credit

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Argentina fears default after American court ruling

Argentina president, Cristina Fernández de Kirchner

Argentina president Cristina Fernández de Kirchner has said her government will not negotiate. Photograph: Cezaro De Luca/EPA/Corbis

Argentinian politicians and global debt campaigners have responded with fury to a US court judgment that risks plunging the country back into default.

Elliott Capital Management and Aurelius Capital Management, regarded as “vulture funds” by Buenos Aires, won a ruling in a New York court on Wednesday that could force Argentina to hand over $1.3bn (£816m) in repayments and interest to the tiny minority of bondholders who refused to sign up to a hard-fought writedown of its debts after the country defaulted in 2001.

Judge Thomas Griesa upheld his own ruling of last month backing Elliott Associates, and said: “Argentina owes this and owes it now.”

In a strongly worded statement, Griesa said that Argentina should make repayments to the so-called holdouts at the same pace that it is repaying the vast majority of bondholders who did agree to a debt-swap. He also warned that US-based bank BNY Mellon, which handles Argentina’s debt payments to US-based bondholders, would be acting “in active concert” with the republic, if it failed to comply with the ruling.

If some of the country’s repayments were diverted to the vulture funds, however, it could reduce the amount available for Argentina’s other lenders, pushing it into a technical default on more than $60bn in outstanding debts. Buenos Aires has repeatedly made clear that it has no intention of paying anything to the plaintiffs in the case.


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Elliott Management Vs Argentina Round 3: The Showdown [Zerohedge]

Most recently, in “Elliott Management Vs Argentina Round 2: Now It’s Personal” we laid out the story of how in the ongoing legal fight between Argentina’s prominent distressed debt creditor, and exchange offer holdout, Elliott Management (and to a smaller degree Aurelius), and distressed debtor Argentina, the moving pieces continue in flux, even as various US legal institutions have demanded that Argentina proceed with paying the holdouts despite the Latin American country’s vocal prior refusals to do so, and most importantly, the lack of a sovereign payment enforcement mechanism. Last night, the fight escalate one more, and perhaps final time, before the Rubicon is crossed and Argentina either pays Elliott, “or else” the country proves all those who furiously bought up Argentina CDS in the past two weeks correct, and the country redefaults on $24 billion of debt. Because as Reuters reports, late last night, US District Judge Griesa overseeing the Argentina case, ordered the Latin American country to make immediate payment with a deadline for escrow account funding of December 15.

In an ruling delivered just as the United States headed off for its Thursday Thanksgiving holiday, U.S. District Judge Thomas Griesa rejected Argentina’s request to maintain his previous order halting payments to holdout investors who did not participate in two bond exchanges of defaulted sovereign debt.


The ruling is the latest development in a litigation saga that has lasted more than ten years and now appears to be favoring holdout bond investors such as Elliot Management Corp’s NML Capital Ltd and Aurelius Capital Management.


If Griesa’s ruling is upheld and Argentina chooses to defy him, U.S. courts could ultimately inhibit debt payments to creditors who accepted the terms of the restructuring, out of consideration for investors who rejected Argentina’s terms at the time.


This would trigger a technical default on approximately $24 billion worth of debt issued in the 2005 and 2010 exchanges.

Griesa essentially circumvented the traditional appeals process and said no more delays.

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Argentina: One step closer to default

The Argentinian government formally responded on November 16th to a recent US court ruling which stated that the it could not discriminate against “holdout” creditors (those bondholders who did not participate in the 2005 and 2010 restructurings of debt defaulted in 2001). The ruling leaves the government with the difficult choice of paying the holdouts—which it has until now sworn it would never do—or falling into default with existing creditors in order to prevent holdouts from accessing seized funds.

There is still little clarity on whether the government intends to comply with the October 26th court ruling. In its November 16th brief, the government stated its willingness to comply with US courts but argued that the holdouts were given fair treatment (having been given the opportunity to enter into the debt restructuring like other creditors) and requested that any payment to them remain on hold until the case passes through the court system. Holders of restructured debt have issued official filings in the US court system supporting this position. Meanwhile, in the local press government representatives continue to reject any payment to holdouts, arguing that this would undermine the rights of those creditors (representing 93% of total defaulted debt) that hold swapped bonds.


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With Argentina reeling from economic downturn, the government is recruiting migrant workers and kids to stay in power [SoberLook]

If you govern a nation experiencing a rapid decline in foreign currency deposits, falling consumer confidence, runaway inflation, insurmountable trade issues, zero growth, and multiple other problems, how do you stay in power? If you are Iran, you recruit an army of violent thugs to keep the government in power. If you are Argentina, you throw money at migrant workers and teenagers and then allow them vote.

The Washington Post: – Argentina is rethinking what it means to be a citizen, proposing radical changes that would have both foreigners and 16-year-olds vote to determine who should run the country.

President Cristina Fernandez’s legislative powerbrokers say the proposed electoral laws will enhance democracy and challenge the world to treat voting as a universal human right. Opponents call it a naked attempt to prolong the power of a decade-old government that has showered public money on migrants and young people.

While welcoming immigrants into polling stations would add 1 million voters, lowering the voting age from 18 to 16 would add 2 million more.

Argentina’s current government is looking to strengthen its political support at the time when the nation is in fact undergoing all the problems listed above.


[Argentina consumer confidence index]

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Update From Uruguay: The Consequences of Ending Bank Secrecy with Argentina [SovereignMan]

By Dean Steinbeck, International Man

Two months ago I wrote an article for International Man informing readers that Uruguay agreed to end bank secrecy with respect to Argentine tax investigations. The article described the likely negative economic implications of Uruguay’s decision, particularly in the real estate sector, and why this is an excellent opportunity for expats interested in living or owning property in Uruguay.

Based on the debate and controversy surrounding my article, as evidenced by the high volume of emails I received, it is obvious that two camps have emerged: one camp that is seriously considering a move to Uruguay to capture this once-in-a-decade opportunity, and another camp that believes Uruguay is immune to any unraveling in the face of geopolitical events that are staring it in the face.

While it is true that Uruguay has done very well since the last crisis that was sparked from the Argentine debacle of 2001, it is questionable whether they can do so again. My first article pointed out some of the logical reasons why Uruguay would not be able to maintain the status quo, and based on current economic data, it appears that events are unfolding exactly as expected.

Argentina Begins to Implode

In Argentina, the situation continues to spiral out of control. The government there has effectively banned the conversion of Argentine pesos into U.S. dollars and has also instituted all-out capital controls to prevent the flight of all U.S. dollars still held in Argentina. As a result, the black market exchange rate for U.S. dollars is nearly 50% higher than the official exchange rate quoted by the government. Moreover, the Argentine government is so concerned about the flight of U.S. dollars that its citizens cannot exit the country without a blessing from the Argentine tax authority and a once-over by cash sniffing dogs.

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Argentina’s dollar deposits down 42.3% from the October peak [SoberLook]

In spite of Argentine authorities’ repeated denials with regard to touching peoples dollar deposits, the “pesoization” fears in that country persist. Argentina’s dollar depositors are quickly taking dollars out of the banking system. Most funds are moving into banks abroad, while some get placed “under people’s mattresses” in the form of notes. The chart below shows private sector dollar deposits since the beginning of May.

Cash-strapped Argentine town pays employees by raffle

A raffle will determine which civil servants in a small Argentine town will receive their pay first, due to insufficient funds, its mayor announced Monday.

“We will draw lots to decide the (order) of payment,” said mayor of Bialet Masse, Gustavo Pueyo, in a broadcast from Buenos Aires private radio station Radio Mitre.

Pueyo said the raffle was approved by national mayoral authorities and the first draw took place Friday, with 23 of the town’s 92 employees receiving their pay. A second raffle is slated for Monday.

Home to 5,000 inhabitants, Bialet Masse is a tourist destination in Cordoba Province, 750 kilometers (466 miles) northwest of Buenos Aires.

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Argentina bans buying dollars as a way to save [Reuters]

BUENOS AIRES, July 5 (Reuters) – Argentina’s central bank on Thursday formally banned people from buying dollars for the purpose of saving them, confirming the government’s de facto policy aimed at safeguarding foreign reserves.


Argentines tend to convert their pesos into greenbacks as a hedge against high inflation and to protect against potential currency devaluations, which they have endured through decades of boom and bust economic cycles.

President Cristina Fernandez slapped new controls on foreign currency purchases just after winning re-election in October, requiring the tax agency approve each individual transaction.

But starting in May, the government sharply limited those approvals, permitting people to buy foreign currency only if they could show they would be traveling abroad.

This sent the black-market rate for dollars soaring. Argentines now pay about 5.95 pesos per dollar on the black market while the official rate is 4.53.

Thursday’s central bank statement suspended a norm that had allowed individuals to buy up to $2 million a month without having to specify the destination of the funds.

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Argentine President Forces Leading Banks to Lend

BUENOS AIRES, Argentina (AP) — Facing clear signs of a looming recession, Argentina’s president is ordering the country’s biggest banks to lend $3.3 billion of their clients’ savings at rates below what many believe to be the inflation rate.

The requirements taking effect Thursday limit interest on the loans to 15 percent a year. The government says inflation is below 10 percent, but many analysts estimate it at around 25 percent, one of the world’s highest rates.

President Cristina Fernandez says the government saved the private banks when they were in trouble, and now it’s the banks turn to do their part to fan Argentina’s decelerating economy by lending 5 percent of their deposits to small and medium-sized businesses.

Argentina, one of the world’s leading grains suppliers, saw its economy expand by almost 9 percent last year on the back of high commodity prices and industrial output led by car sales to Brazil. But blistering growth has been reined in by less demand from its neighbor and leading trade partner Europe’s economic woes and surging inflation.

Fernandez has said that Argentina’s top 20 banks will lend more at a maximum interest rate of about 12 percent for a minimum three-year period. Economic analysts say the move is a quasi-subsidy imposed on the leading bankers that does not get to the core of what discourages investors: one of the world’s highest inflation rates and one of the most volatile business environments.

“This is a negative development inasmuch as requiring banks to lend at negative real rates erodes the capital base of banks and by distorting the cost of capital will lead to a misallocation of credit,” senior Goldman Sachs economist Alberto Ramos wrote in a research note.


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Argentina’s Growing Rift Between Labor and Government

Stratfor Latin America analyst Karen Hooper examines the mounting political tension between labor unions and Argentine President Cristina Fernandez de Kirchner.

Argentina – Press coverage

Argentina Has Gradually Destroyed A Once Promising Energy Industry

attached image

Over the past few years Argentina has seen the nationalization of pension funds, the re-allocation of central bank reserves and most recently they have experienced the nationalization of 51 percent of Yacimientos Petrolíferos Fiscales (YPF), a former state oil firm. The nationalization targeted specifically the shares of Repsol, a Spanish company who purchased the shares in 1999, six years after YPF was privatized.

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Strike slows flow of grains to top Argentine port

BUENOS AIRES, June 11 (Reuters) – Grain trucks entering Argentina’s main port of Rosario slowed to a trickle o n Monday due to a five-day-old sales strike by farmers, but exports remained uninterrupted due to ample dockside reserves.  The sales freeze, set to end at midnight on Tuesday (0300 GMT Wednesday), was called last week by growers angry about national government agricultural policies and a recent tax increase in No. 1 soy- and corn-producing province Buenos Aires.  Argentina is a top exporter of both crops at a time of increasing world demand.
Only 881 trucks entered Rosario in the 24 hours through mid-morning o n M onday, down from 3,800 on the same day last year, the Rosario grains exchange said on its website.  About 80 percent of Argentina’s farm exports are shipped
from terminals that line the Parana River at Rosario, offering quick access to the shipping lanes of the South Atlantic.
“There were stocks piled up at the grains terminals before the strike started. If the strike ends tomorrow, as we expect it
to, there should be no slowdown in the export rate,” said Patricia Bergero, an analyst at the Rosario grains exchange.
As angry as they are about profit-siphoning wheat and corn export curbs imposed by President Cristina Fernandez and the land tax hike, farmers were not expected to extend their action past Tuesday or repeat the huge, 2008 tax protests that paralyzed the sector.

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Argentina’s Fernandez To Decide On ‘Pesofication,’ Cronista Says

Argentine President Cristina Fernandez de Kirchner will decide in coming days whether to support legislation that would force all financial transactions to be carried out in pesos, newspaper El Cronista reported, citing Agustin Rossi, the leader of Fernandez’s Victory Front alliance in the lower house of Congress.

Lawmaker Edgardo Depetri on June 7 presented a bill that would force all contracts, including real estate transactions that are normally done in dollars, to use the peso in future. The legislation wouldn’t affect dollar bank deposits or existing contracts.

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Argentina Proposes Bill to Allow Dollar Contract Payments in Pesos

BUENOS AIRES–Argentine President Cristina Kirchner has submitted a bill to Congress that would allow debtors to pay U.S. dollar-denominated contracts in pesos.

The bill comes amid a broad government push to wean Argentines off their long-held preference to use dollars for major transactions. It’s unclear if the bill will apply retroactively or if it could affect government debt.

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