Argentina burst back onto the global financial stage yesterday with its first sovereign bond offer since the country's 2002 default, hoping to pave the way for new president Mauricio Macri to get Latin America's third-biggest economy growing again.
Calling the transaction “tremendously successful,” finance minister Alfonso Prat-Gay said the government received more than $60 billion (€52 billion) in bids, about 22 per cent of which he planned to accept, for the newly-minted sovereign paper.
“This is the biggest demand ever seen for a bond or stock offered by an emerging market government or company, and probably one of the 20 biggest in the world generally,” Mr Prat-Gay told a news conference in Buenos Aires.
Local over-the-counter bonds rose 1.9 per cent on the announcement of the deal, which closes a painful chapter in the country’s history starting with a financial crisis 14 years ago that tossed millions of middle-class Argentinians into poverty. Defaulted bonds The transaction was engineered to pay off hedge funds that had sued the country over its defaulted bonds.
Once the funds are paid, borrowing costs for provincial governments and Argentine companies are expected to drop. Mr Macri hopes the new investment will help to revive the country’s stagnant economy.
He won the presidency late last year on promises of lifting trade and currency controls that had weighed down the economy under previous leader Cristina Fernandez. She refused to negotiate with hedge funds that rejected the country's 2005 and 2010 restructurings, which offered about 30 cents on the dollar. The funds sued in the US courts for full repayment of the defaulted Argentine bonds they still hold.
Mr Macri, inaugurated in December, lifted Ms Fernandez’s economic controls, prompting a 30 per cent devaluation of the Argentine peso, and reached a deal with the funds.
"The fact that a government with only four months in power has solved this issue, which had been pending for more than a decade, is a major success for Macri," said Ignacio Labaqui, who analyses Argentina for consultancy Medley Global Advisors.
Government deficits grew and central bank reserves fell to precarious levels under Ms Fernandez. Better access to financing is expected to help Mr Macri carry out his open-market policy reforms without the severe spending cuts that have got previous Argentine leader thrown out of office.– (Reuters)
