Sunday, July 27, 2014

Argentina: Uncertainty three days of an eventual default

Spokesmen for the ruling party and the opposition does not agree on the magnitude of the impact it will have on the local economy if the country falls into default, although all agreed that it will not be as tragic as the default 2002.

The country entered this week in the countdown to reach an agreement with the holdouts to avoid falling into a new default on the public debt, but uncertainty prevailed about the steps the government will send a delegation to whether the United States has to follow the bargaining or if you limit the contact telephone conversations.

In this context, concerning the government and the opposition disagreed about how much impact it will have on the local economy if the country falls into default, although all agreed that it will not be as tragic as the default in 2002 under an economic and social crisis.

On Wednesday expire grace period that Argentina had to avoid getting into technical default, since no effective on payment of due interest on the debt to bondholders restructured that operated on June 30 because Judge Thomas Griesa ordered to return the country money that the government had deposited for that purpose in the accounts that the Bank of New York Mellon (BONY) with the Central Bank.

The two meetings held last week by the team headed by Finance Secretary, Pablo López, with attorney Daniel Pollack, appointed by Griesa as mediator in the conflict week were unsuccessful, and that the judge said the stay (injunction) to unlock that payment.

The stay allows the government to claim payment at regular bondholders and avoid technical default, to rescind momentarily failure Griesa ordered to pay her 1,330 holdouts million in a lump sum in cash.

On the official side, Deputy Héctor Recalde downplayed the consequences of an eventual default by stating "not going to have tragic consequences because we are not in 2002, and the domestic market will continue much as at present, will not to be changes. "

He explained that "in January widely recover negotiation possibilities for not applying to us the clause" Rufo (for its acronym in English) that prevents offer holdouts voluntarily a higher price than that received by bondholders who entered the debt swap 2005 and 2010.

Instead, the president of Banco Ciudad, Rogelio Frigerio, warned that "what will happen is that the problems with which the Argentine and lived long and we worry, insecurity, inflation, unemployment, lack of dollars are going to increase, "while predicted that" recent months also transition this government will be less relaxed than it might have been. "

"We are on the cutting edge, we're playing with a lot of risk because we do not have much time. At this point, the only thing that can save us from default is that the same funds litigating against Argentina today asked the judge to allow you to pay this that expires at the end of this month, "Frigerio estimated.

The economist said in dialogue with Mitre radio that "there is any chance of that," because neither the holdouts "suits them into the Argentina default".

Meanwhile, the national deputy Hermes Binner considered that the Government has reached this stage of conflict with the holdouts that "has given little thought to the claims of Justice New York," and remarked that the default "absolutely negative for the country. "

"It's a situation where there is presumed difficulties in exporting, importing trouble. Even with the candles at half mast in the economy, I hope we have the great opportunity to go ahead and aspire to better times," said Binner.

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