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Argentina Won’t Repay Bondholders From Default 10 Years Ago Despite US Court Ruling

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Despite US courts ruling that Argentina must pay bondholders who own defaulted bonds (related to $100 billion default 10 years ago), the Argentinian Finance Minister has announced this won’t happen as debt payments are immnue to US laws.

BUENOS AIRES, Nov 18 (Reuters) – Argentina will not pay creditors who own defaulted bonds despite a U.S. federal appeals court ruling in favor of the holdout creditors, the economy minister was quoted as saying in an interview published on Sunday.

The 2nd U.S. Circuit Court of Appeals in New York last month ruled that Argentina discriminated against bondholders who refused to take part in two debt restructurings as the nation tried to recover from a $100 billion default a decade ago. The decision upheld a ruling by U.S. District Judge Thomas Griesa.

The South American country appealed that ruling, and on Friday told Griesa that sovereign debt repayments made outside the United States are immune to U.S. law and seizures by holdout bondholders.

“Argentina is responsible and will fulfill all commitment it has made to its creditors. … Our creditors are all those who participated in the two restructuring proposals in 2005 and 2010,” economy minister Hernan Lorenzino told newspaper Pagina 12.

“We’re going to continue to oppose any alternative that goes beyond that. We’re going to continue presenting and defending our position to each legal entity.”

The judge is expected to give a speedy response, given that Argentina is due to start making $3.3 billion worth of payments to exchange bondholders starting Dec. 2.

Argentina and holdout bondholders that refused to join massive debt swaps in 2005 and 2010 are in a long-running battle over payment, an outgrowth of the country’s roughly $100 billion default nearly 11 years ago.

“Argentina reiterated to judge Griesa that the decision taken about pari passu (equal treatment) cannot prejudice creditors who entered the debt swaps,” Lorenzino was quoted as saying.

Last month’s ruling sparked fears that U.S. courts could ultimately inhibit debt payments to creditors who accepted terms of the restructuring, out of consideration for investors who rejected Argentina’s terms at the time.

“We’re going to continue our legal defense in all areas possible, including in the United States’ Supreme Court,” Lorenzino added.

 

Source: Reuters

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Argentina Close To Default

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With protests growing in Argentina against the Government the CDS shows a 60% chance of default in weeks according to ZeroHedge.

Dear Buenos Aires: we have three words of advice – “hide yo’ catamarans” (before Paul Singer comes and collects them all once you default again in what the market now deems is inevitable to occur in the next few weeks). 5Y CDS on Argentina just reverse-Baumgartnered to over 3000bps (49/53% upfront) and short-dated CDS imply a 60% probability of default (assuming a 25% recovery).

The Argentinian government under Cristina Kirchner is deeply unpopular and in recent weeks there has been a growing unrest.

Angry over inflation, crime and corruption, hundreds of thousands of Argentines of all ages flooded the capital’s streets for nearly four hours to protest against President Cristina Fernandez in Argentina’s biggest anti-government demonstration in years.

Protests were reported right across Argentina and beyond its borders.

A spokesman for Buenos Aires’ Justice and Security Ministry estimated the demonstrators in the capital at 700,000 people. Other demonstrations were held on plazas across Argentina, including in major cities such as Cordoba, Mendoza and La Plata, while protesters massed outside Argentine embassies and consulates from Chile to Australia.

In Rome, about 50 protesters, all Argentine expats, held a noisy protest outside the consulate on Via Veneto, one of the city’s landmark streets. Among the slogans being shouted was “Cristina, go away.”

About 200 demonstrators braved rain in Madrid to bang pots outside the Argentine consulate.

Approval ratings plummeting in less than a year.

Fernandez easily won re-election just a year ago with 54 percent of the vote but saw her approval rating fall to 31 percent in a nationwide survey in September by the firm Management & Fit. The poll of 2,259 people, which had an error margin of about two percentage points, also said 65 percent of respondents disapproved of her opponents’ performance.

But it’s when people are hit in the pocket that people react and inflation is biting hard.

Inflation also upsets many. The government’s much-criticized index puts inflation at about 10 percent annually, but private economists say prices are rising about three times faster than that. Real estate transactions have slowed to a standstill because of the difficulty in estimating future values, and unions that won 25 percent pay hikes only a few months ago are threatening to strike again unless the government comes up with more.

Source: ZeroHedge, LasVegasSun

 

Mexico To Restrict Cash Transactions

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Another country has joined the list for limiting cash transactions by it citizens. Mexico has signed into law, a ban on large cash transactions carrying a minimum penalty of 5 years in prison.

Large Cash Transactions Banned In Mexico … Outgoing Mexican President Felipe Calderon has signed into law a ban on large cash transactions. The ban will take effect in about 90 days and it is part of a broader effort to control monetary flows within the country. Under the law, a Specialized Unit in Financial Analysis operating within the Attorney General’s Office will be created to investigate financial operations “that are related to resources of unknown origin.” For real estate transactions, cash payments of more than a half million pesos ($38,750) will be forbidden and, for automobiles or items like jewelry, art, and lottery tickets, cash payments of more than 200,000 pesos ($15,500) will be forbidden. The law carries a minimum penalty of five years in prison. – Forbes

and as the Daily Bell put it

The power elite intends to lock down the world, it seems, in order to track every monetary transaction of any significance.

We wrote about this trend previously in “Spain Bans Cash.” Here’s an excerpt:

… As we have long predicted, the phony “sovereign debt” crisis in Europe is being used to justify all sorts of authoritarian measures.

…..

these national bans continually pressure more and more freedoms, including the freedom of shielding one’s wealth from prying eyes. And that’s just the point …

In the last 2 years the following countries have made similar restrictions.

Source: The Daily Bell

Argentina Bank Runs

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Reuters has reported of up to $100 million per day been withdrawn from deposits in Argentina. All the focus is on Europe and Spain at the moment but Argentina is struggling and a series of capital controls introduced by the government has prompted this action. Of course they have been through it before and know what to expect.  Up to 1/3 of dollar deposits have been withdrawn.

BUENOS AIRES, June 8 (Reuters) – Argentine banks have seen a third of their U.S. dollar deposits withdrawn since November as savers chase greenbacks in response to stiffening foreign exchange restrictions, local banking sources said on Friday.

Depositors withdrew a total of about $100 million per day over the last month in a safe-haven bid fueled by uncertainty over policies that might be adopted as pressure grows to keep U.S. currency in the country.

It appears to stem from fear in a Government clampdown as it struggles with the economy and is on the verge of monetary restrictions.

The chase for dollars is motivated by fear that the government may further toughen its clamp down on access to the U.S. currency as high inflation and lack of faith in government policy erode the local peso.

“Deposits keep going down,” said one foreign exchange broker who asked not to be named. “There is a disparity among banks, but in total it’s about $80 million to $120 million per day.”

Its getting harder for ordinary people to get their hands on dollars as there is a distinct preference over pesos.

The near-impossibility of buying dollars at the official rate is driving some savers and investors to pay a hefty premium in the black market.

Many are taking what dollars they can get their hands on and stashing them under the mattress or in safety deposit boxes, fearing moves by the government to forcibly “de-dollarize” the economy. Officials have strongly denied any such plan.

The president’s battle to slow capital flight and fatten the central bank reserves needed to pay the public debt has prompted even tighter controls in recent weeks, making it almost impossible to buy dollars at the official rate. The effects have been felt throughout the South American country’s economy.

For example. Argentines, who normally pay for new homes with stacks of dollar bills, have been struggling to get their hands on U.S. currency since Fernandez started imposing stringent controls on dollar buying late last year. [ ID :nL1E8H6EZ8]

She wants Argentines to end their love affair with the greenback and start saving in pesos despite inflation clocked by private economists at about 25 percent per year.

Fear from the recent past has driven this behaviour but its understandable.

But savers in crisis-prone Argentina are notoriously jittery. Memories of tight limits on bank withdrawals and a sharp currency devaluation remain fresh a decade after the country’s massive sovereign debt default.

“There is a lot of fear, considering everything that has happened before,” another foreign exchange broker said. “Confronted by risk, whatever kind of doubt, depositors pull their dollars out of the bank and wait to see what happens.

 

Argentina Limits Use Of Cash

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Another example of people being limited in the amount of cash they may use, this time from Argentina. The people are not only allowed to spend 10% of what was previously allowed. In the last few months have been increasing stories of either capital controls in various countries or banks refusing to handle cash. 

The government will restrict daily cash transactions to 1.000 Pesos (231 US dollars) per person, down from 10.000 Pesos, according to a statement in the Official Gazette. The measure affects activity in the stock and bond markets, investment funds and in the futures markets. Operations above the limit will have to be done through Argentine bank accounts that are authorized by the central bank.

“They are forcing a higher level of formality in the economy, as cash transactions allow more irregularities,” said Felipe Hernandez, an analyst at RBS Securities Inc. in Stamford, Connecticut. “This is in line with other measures to prevent money laundering, for which the government has been under a great deal of pressure.”

Previous related articles

Cashless Society – BOA Refuse To Accept Cash For Mortgage Payment

Cashless Society Coming Soon

Capital controls In Italy – Plans To Ban Cash Transaction Over €300.

Greece to Make All Large Cash Transactions Illegal

Euro zone – two outcomes

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With the current demise of the Euro zone there appears to be only two outcomes

1. Eventually descends into chaos and breaks up. Euro zone countries are carrying too much debt to GDP and haven’t a hope in hell of growing their way out. 😦

2. ECB = CTRL+P. The lender of last resort prints money.

Personally I wouldn’t mind going back to the old Irish Punt but make sure you are protected by transferring your wealth into physical gold and silver. Remember the Argentina Peso dropped massively in value when they finished the peg with the dollar in 2002.

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