Argentina’s Twisting Conspiracy Plots
Argentine stocks and bonds stalled in January as literally hobbled President Fernandez after an ankle injury blasted the findings and suspicious death of a prosecutor investigating an alleged Iranian bombing a decade ago, while relinquishing no new holdout ground after expiration of the original swap same terms clause. The Nisman report had implicated leaders in a deal with Tehran authorities to avoid blame and before formal presentation he was either murdered or committed suicide in his Buenos Aires high-rise. The President ordered an intelligence service shakeup in the aftermath and denied any previous absolution for the synagogue attack for oil and loans. Her polemic followed a New Year message emphasizing the return of gross international reserves to $30 billion with $5 billion in Q4 2014 agricultural exports, an initial $2.5 billion Chinese currency swap installment, and continued exchange controls which should allow management of 2015 hard currency debt service at half that sum. Oil import savings should add another $2 billion and could forestall further devaluation heading into the October presidential succession. Finance Minister Kiciloff has hinted at resumed negotiations in New York after other non-participating claims were joined to the plaintiff vulture funds bringing the total to $18 billion, but a breakthrough is unlikely before the transition and the next government may insist on its own review. The trade surplus may shrink to $4 billion this year on lower world soybean prices and farmer hording to escape taxes and peso weakness. Recession is due to repeat with 1.5 percent output fall although inflation may moderate to 25 percent barring overly generous pre-election union wage hikes. The IMF granted another delay to improve statistics citing progress, but GDP warrants needing 3 percent GDP growth will not pay off again as the feature is considered for a possible future private creditor comprehensive deal to complement the recent Paris Club workout.
In Ecuador, President Correa may face no such term limit as he maneuvers through his party’s two-thirds parliamentary majority to serve indefinitely with constitutional revision. Oil provides one third of budget revenue and the deficit was already at 5 percent of GDP before the price collapse which will pare growth to 1 percent. China has offered $7.5 billion in project loans and another external bond may be attempted as the December 2015 $650 million maturity comes due. A $1.7 billion arbitration award to Occidental Petroleum is also pending which officials refuse to recognize, and the current account deficit could reappear as agricultural exports equally slump. De-dollarization could be in the cards with a revised banking and monetary code enshrining electronic currency but financial institutions remain unsure of its intent and impact in view of Bitcoin’s prominent troubles. This option has not been contemplated for ally Venezuela, as President Maduro announced $20 billion in long-term Chinese support along with a tweaked currency trading mechanism that will re-invite private brokers as the informal bolivar rate nears 200/dollar in a nonstop panic pattern graphic plot.
