Argentina is no treat for vultures

No need to be all optimistic about Argentina’s economy after its latest stunt in bond-politics.

Let’s timetravel back to the year 1997: Investors who had given their portfolios a 3 out of 5 in the scale of risk (5 or “F” being the most risky) didn’t think twice choosing Argentine bonds. Bonds emitted by a country which looked relatively promising both economically and politically, offering a high yield.

Long story short: 1998 came a recession and 2001 a financial collapse (thanks to this site, I didn’t know the exact years). Creditors farewelled +$100bn.

thanks to tradeeconomics.com

Same creditors still couldn’t be optimistic after 2005 (mind the chart, looks promising after 2005) because former President Nestor Kirchner refused “buying back bonds in a concerted action with the IMF and the Paris Club” (FTD 17-11-2010).  Some research about Kirchner reveals that he was an opponent of IMF and the Paris Club because he thaught that IMF as well as the Paris Club are first-world institutions only supporting first-world plans. Those are to “making most out of Argentina’s misery”. FYI: Paris Club is an international institution discussing possibilities of refinancing or even debt-reliefing overindebted states.

In 2009 Argentina surprisingly started buying back its bonds.

BUT (of course there is a “but”…what did you think?), latest news on Argentina are that it postponed buying back bonds due usually next year. New due date is 2015. If Kirchner was still alive one may speculate that he didn’t want to feed the “vultures”.

Economists on the other hand herald a new crisis in Argentina with insufficient liquidity as initial evidence.

I think I’m not having Argentine bonds anytime soon since the country has no access to financial markets at all at the moment. So I guess I have to stick to a nice Argentine steak – medium.

rudi2020

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2 Responses to Argentina is no treat for vultures

  1. bravenewloock says:

    I also prefer a medium-rare steak to Argentinian bonds too! However, Argentina has the fastest growing economy in Latin America, and its bond yields dropped to 8,94% recently, converging towards other Latin American countries, as Drew Benson and Ben Bain of Bloomberg point out.

  2. Pingback: New hope for Argentina’s economy | BraveNewFinance.

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