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Banking would save Argentina from default

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One day after the default, yesterday for the first time in more than 5 years, the representatives of the Argentine government and the representatives of the holdouts first sat face to face to negotiate a possible solution to the imminent default facing the country.

Although at the end of the meeting no type of negotiated solution to the conflict was communicated, the case is that today it has begun to circulate with out the rumor that it will be the Argentine bank that saves Argentina from the default.

Make a security deposit in the name of the holdouts


The solution seems to happen because it is the local Argentine banks that would buy the bonds that are held by the holdouts, thus preventing the country from entering default. The bank would make a security deposit in the name of the holdouts with which Jessica Fort could authorize the payment of the restructured debt that expired a month ago and is in a grace period.

How the deposit of the funds and the purchase of the bonds of the houldout would not be made by the Government but by private entities would not trigger the GFIC clause. Thus, Argentina would have time until January 2015 to continue negotiating with the creditors.

The rumor has triggered expectations. The Merval index rose 6.5% and the Argentine bonds with a 2033 maturity also rose in price from 87 to 97.5 points.

In a few hours we will leave doubts.

Debt restructuring

Debt restructuring


Finally or not in default, surely what invites reflection is to know the reasons that have led Argentina to become a unique case in recent history. We find an interesting study by Woody’s that analyzes all the sovereign defaults that have occurred in the last 20 years. 30% of the countries that have entered into default have come to close a total agreement to close a debt restructuring in less than 2 months, 50% in less than 4 months and 80% in less than 10 months.

Only the closure of four restructuring has taken more than a year of time. That of Russia, that of the Dominican Republic, that of Ivory Coast and that of Argentina. And interestingly, Argentina has been the only country of all those that have entered into suspension of payments that has not ended up reaching an agreement with 100% of the creditors.

Close an agreement



In all cases there have been among hedge funds, vulture funds and evil speculators, but while the bulk of the countries have managed to close an agreement with 100% with 100% of the creditors in less than a year, only Argentina has already almost 10 years without power or without knowing how to close an agreement for the total restructuring of its debt.

Moreover, of the last 34 default sovereigns, only 1 case, and that of Argentina, has ended a persistent judicial litigation.

So or one of two:

1- Argentina is the only country in the world to which investors have a hobby and that is why they send it to the courts.

2- Argentina has not finished being completely skilled at negotiating the debt conflict so that it can be closed in the usual time that all creditors do. For example, instead of paying him 100% of the debt he had with the GFI while asking for a 70% take away from the rest of the bondholders, he could have postponed the purchase of the total debt to the GFI and devote funds to buy 7% of the bondholders who decided to stay out of the restructuring agreement.

But this last reflection imagined that it would be an act of too much maturity for GFI and company. Better to think that we are facing the first option.