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Argentina Scrambles To Raise $10 Billion, Avoid Reserve Collapse; BONARs Bidless
A few days ago, in the aftermath of Argentina's shocking devaluation announcement, we showed the one most important chart for the future of that country's economy: the correlation between the value of the Arg Peso and the amount of Central Bank foreign reserves, both crashing. And as we predicted when we, before anyone else, started our countdown of Argentina's reserves, once the number hits zero it's game over for the Latin American country. Or rather, game over again, considering the number of times in the past Argentina has defaulted. Unfortunately over the past week, things for the Central Bank have gone from bad to worse and were capped overnight with the following headline:
- ARGENTINE CENTRAL BANK SAYS RESERVES FELL $170M TO 28.1B TODAY
And this is what Argentina's reserve depletion looks like:
To summarize: Argentina has now burned through $2 billion in less than two weeks, the fastest outflow since 2006, and a trend which if sustained (and we see no reason why it would change), means it has just over half a year left of reserves projecting a linear decline. However, since the lower the amount of reserves, the faster the withdrawals will come, it is safe to predict that the endgame for Argentina will come far sooner, just as its suddenly crashing bonds seem to have realized.
Which is perhaps why, as Argentina's La Nacion reports, the country is suddenly, and long overdue, scrambling to raise $10 billion to "counter the flight of capital" from the country.
Alas, it just may be too late.
According to the website, Argentina's economy minister Axel Kicillof secretly approached international banks, the same one he has been criticizing over the past months, with a simple request: please give me $10 billion. Alas, considering the country's track record of "honoring" its debt repayment promises, not even promising the required interest rate of +? will do much to generate interest in this particular offer banks can not refuse. Or, rather, can and will.
From La Nacion, Google translated:
Nacion reporters say that the meeting was held in strictest confidence, just in the days before major upheaval in the exchange market. When asked about it, the Economy Ministry spokesman did not confirm nor denied the information, in ABA did not respond to calls from this newspaper.
It is imperative for Argentina to get the dollars that can counter the flight of capital, which in January alone cost the Central Bank (BCRA) U.S. $ 2.499 billion of its reserves. It was the biggest drop since 2006, when the country repaid its entire debt of more than U.S. $ 9 billion to the International Monetary Fund (IMF).
The minister confided bankers requesting leave to look for dollars abroad, either by issuing new debt or through commercial credit lines that banks could get. Some entities, according to sources consulted by the NATION, and would have set to work to organize a tour to Kicillof investment to New York this month.
In other words, Argentina will be meeting Goldman shortly. So, in the aftermath of the Denmark Dong affair, we can probably expect another government "overhaul" in a few months, mediated by everyone's favorite vampire squid who is about to make Argentina an offer it can't refuse. Or maybe even Goldman won't touch this any more:
The order of Kicillof, noted the sources, was debated this week between ABA bankers. Although they pledged to work in private they also recognized that it will be difficult in the current context for Argentina to access fresh funding at a reasonable rate of interest and, especially, in the amounts the Government needs, somewhere around U.S. $ 10,000 million.
It gets worse:
In addition, they assert, although the Government intends to solve their conflicts with the Paris Club and Repsol, the devaluation of 18.6% recorded in January, the highest in the last 12 years, quite complicated negotiations, and that sowed new doubts about the ability to repay debt Argentina.
Yes, well, losing 20% of your investment "gains" overnight due to an arbitrary decision by the government does kinda make one want to invest in said government for a bit to quite a bit. As for the inflationary panic that has already gripped the country, and which we already commented on, well - it's only just begun.
Still, all of the above is largely expected, and was perfectly predictable by anyone not caught up in overconsumption of hopium pills, or having their head stuck in the sand of denial. The one thing we did learn is something which will soon make the front pages of all serious media publications around the globe.
After sharp declines in recent weeks, a sovereign dollar bond Bonar 17 yielded 16.2% yesterday.... Several weeks ago Kicillof announced his intentions to return to the debt markets. The National Social Security Administration (Anses) began in early January to sell their bonds in the market Bonar 18 to contain the escalation of the "dollar bag" on one hand, but also to begin to make a curve in the medium term rates.
Curious what the BONAR is? Courtesy of this handy glossary of Argentine financial terms and acronyms, we now know that it is the formal name of an Argentina dollar-denominated bond issued under domestic law. Or, as in the case of Greece, precisely the instrument that will quite soon be crammed down due to non-existent covenant protection for creditors.
In other words, in a worst case for Argentina scenario, watch as hundreds of millions of BONARs suddenly deflate to nothing in a bidless market.
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Hard to sleep with a BONAR
For once a short BONAR is a blessing
Couldn't they just sell something to raise the loot? I don't know, maybe an island or something. Hey, why don't they just sell the Falklands? That should be worth about what they need to get out of this mess!
About those foreign-owned Estancias -- sold by guys like Doug Casey (International Man)... Will they be nationalized, and sold off to GS as collateral?
Relax Doug, gallows humor. ;-)
I predict that China will at some point step in and prop them up so as to 1)dilute their dollar exposure further and 2) get access/control of Argentina’s food and energy industries.
It may happen quietly, but it will happen, and probably already is.
It will be fun to watch what Europe/Germany does when they do.
"Yes and no Mr. Bankster. The guillotine is for you, but it's not a gift."
Way to go, Frau Kirschner!
Does anyone else (besides you and me) realize that your name is anagram for CKirsch? :-)
That you Christina?
Actually, I don't really mind that Argentina is swimming naked
Probably best not to buy gold and silver miners in Argentina - nice nationalisation target. How many such mines are in the mining etfs?
Husk; indeed. I google imaged 'Argentina Topless' and man they are heavy-laden with silicone. Nipples stretched like IHOP Silver Dollar flapjacks.
Why don't they just float their currency? Let the markets set the rate daily, then they wouldn't have these runs against the Argentine Central Bank. If little old New Zealand can do it then so can the much larger Argentinia.
These things are never straight lines. Also applies for rate of decline of USA and the USD -- starts out slow and then it's very fast. But don't cry for me, Argentina.
Watch closely. We are all under the same masters.
http://www.youtube.com/watch?v=7laXeTqr6Qw
("Surviving Progress" - Full Documentary)
P.S.: LOTS of foreigners (many from the USA) buying land in Argentina.
Foreigners Own The Land Equivalent of New Jersey in Argentina - See more at: http://investba.com/2012/08/foreign-land-ownership-argentina/comment-page-1/#sthash.qjzq9s3L.dpuf
That was in 2012. Things are moving fast and I believe Fukushima is involved.
Cristina recibió al hijo del Emperador de Japón, en su segunda visita a Argentina
http://www.perfil.com/policia/Cristina-recibio-al-hijo-del-Emperador-de-Japon-en-su-segunda-visita-a-Argentina-20140130-0041.html
For now, you can still eat seafood from the southern Atlantic and my russian geiger-müller counter gives good readings everywhere I check, down here.
Mmmmm.....
Most of the MSM stories about Argentina and even the ZH stories are WRONG.
Why do I say this? Very simple, look at anything that has a market in Argentina and also internationally, like for instance the ADS for YPF, and check the value of these shares in Argentina and in the US (http://www.ypf.com/enu/InversoresAccionistas/AccionYPF/Paginas/Cotizaci%... 271 pesos & 22.19 USD implying an exchange rate of 12.21 and NOT 8.20 as quoted by the MSM) and you will discover that there has been NO connection between the "official" exchange rate (reported by MSM and ZH) and the real rate, the "market" rate. You can do this analysis with any other security that is traded in both countries and you will get similar results. The official rate has not been 'real' except for government sanctioned operations for several years now. The freely traded rate that is incorrectly quoted by the MSM as a black market or blue rate has been the freely traded rate for 5 years at least, widely divergent from the official rate. The leak in reserves occurred due to the stupidity of the government in trying to maintain an exchange rate that they can't really control. While their foreign balance of payments was positive, they wasted all of the positive revenues in supporting this artificial rate and distributing money to internal industries that are deficitary, inefficient and only survive due to government protectionism (often major supermarket chains are extorted by the government to sell more expensive and bad quality appliances manufactured locally). Due to their disastrous energy policy, they are now in the situation where they have to import so much oil (and they have the third larges reserve of oil and natural gas in the world, https://en.wikipedia.org/wiki/Vaca_Muerta_oil_field ) that their balance of payments has turned negative. Furthermore, since they arbitrarily expropriated YPF from Repsol, violating even their internal laws, http://www.law360.com/articles/404611/repsol-can-t-sue-ypf-partners-afte... NOBODY trusts them, so they can't get the investment necessary to exploit those reserves.
For USA standards, everything in argentina is corrupt. For them it is fair. The government lies to the people, and the people massively lie to the government, false testimony NEVER goes punished. Smart thieves quickly learn to become criminal lawyers and to let others rob and then get the benefits by representing them in court. Prisoners are used by the governing political party in rallies. The second larges fishing company in the Country is owned by a guy who doesn't know about taxes or the tax system, nor does he have an accountant, nor does he have primary level education. But he gets caught exporting a full refrigerated container load of drug stuffed shrimp to Europe. And he gets caught by chance by a temporary employee. And when that happens the news goes into prime TV over there, including that the Secretary of Fishing (federal level secretary) flies to the South, where the fishing company is located to meet with the judge (who is terrorized of the case he got in his lap). The opposition claims that the company is really owned by the politicians in power and that the aboriginee who appears to own it in paper is only a front. But can you imagine mounting a factory that stuffs shrimp with drugs and export container loads of the stuff without the local people, the employees, the local police, the local DEA, the local Customs police, the Federal police knowing and ever catching you? Sounds like impossible, unless the goernement officially sanctions it as OK: http://translate.google.com/translate?sl=auto&tl=en&js=n&prev=_t&hl=en&i...
Also remember that the Kirchner political campaign was financed by Chavez in cash, as it was demonstrated in the USA, where the FBI recorded conversations of the guy that was caught carrying the suitcases full of cash to Buenos Aires: http://www.theguardian.com/theobserver/2008/sep/21/usa.venezuela
In summary nothing new happened in these days, why is it in the MSM? Good question. This has been a very slow moving train reck for several years. The only new thing that happened was that the central bank slowed down their manipulation of the "official" exchange rate, but the real rate has been over 50% of the official for a very long time and is there for anybody to see.
Oh, for the gold bugs, the remaining Argentinean reserves are NOT all in cash but it owns 61.7 Tons (as of 4/2013) OF Gold http://www.relbanks.com/rankings/world-gold-reserves . They may be forced to sell at today's paper market prices.
"false testimony NEVER go punished"
... As in... The rest of the World? Bush? Chenney? Obama? Clinton (both of them, he and she)? Reagan? Shinzo Abe? Merkel? Letta? Their majesties everywhere, all along? The Banksters? Corporate CEOs? Should I go on? The list goes stright back to the Roman Empire at least!
DIS_INFORMATION...
DES_INFORMACION...
(•?•) ??? ?_?
Otro ejemplo por la DES_INFORMACION..
Another example of " DIS_INFORMATION"..
C/P:
{El inicio de la retirada por parte de la Fed de sus medidas de estímulo a la economía estadounidense -consistentes en 85 millones de $ mensuales destinados a la compra de activos- ha provocado el nerviosismo en Wall Street en el Dow Jones de Industriales, lo que ha conllevado que la barrera estratosférica de los 16.000 puntos haya saltado por los aires y se encamine hacia la barrera psicológica de los 15.000 puntos.Ello tiene lugar tras una caída semanal acumulada cercana al 4%, fundadad en la psicosis vendedora originada por la devaluación del peso argentino y el remate de activos en mercados emergentes.}..
Saludos gente de zerohedge...
@ El_Puerco
"Otro ejemplo por la DES_INFORMACION..
{El inicio de la retirada por parte de la Fed de sus medidas de estímulo a la economía estadounidense -consistentes en 85 millones de $ mensuales destinados a la compra de activos- ha provocado el nerviosismo en Wall Street en el Dow Jones de Industriales, lo que ha conllevado que la barrera estratosférica de los 16.000 puntos haya saltado por los aires y se encamine hacia la barrera psicológica de los 15.000 puntos.Ello tiene lugar tras una caída semanal acumulada cercana al 4%, fundadad en la psicosis vendedora originada por la devaluación del peso argentino y el remate de activos en mercados emergentes.}..
Saludos gente de zerohedge..."
for the sake of English-speaking community in ZH, i take the liberty to translate your post into English with the help of various online translators :-) pls correct it if anything gets lost in translation... :-)
@ El_Puerco --> i guess you did mean BILLION i/o million wrt Fed stimulus; fundadad --> fundad
Another example of DISINFORMATION...
The beginning of the withdrawal by the Fed of its stimulus to the U.S. economy--consisting of $85 BILLION monthly intended for the purchase of assets--has caused nervousness in Wall Street in the Dow Jones Industrial, which has entailed to the barrier of the stratospheric 16,000 points has jumped into the air and move toward the psychological barrier of the 15,000 points.. It takes place after an accumulated weekly fall near to 4 percent, found in the selling psychosis caused by the devaluation of the Argentine peso and the auction of assets in the Emerging Markets.
Greeting to the folks at ZeroHedge...