Argentina's credit rating cut to Selective Default by S&P

S&P Global Ratings cut Argentina’s foreign- and local-currency credit ratings to “selective default” after Argentine President Mauricio Macri issued a decree delaying payments on as much as $101 billion of debt.

“Following the continued inability to place short-term paper with private-sector market participants, the Argentine government unilaterally extended the maturity of all short-term paper on Aug. 28,” the ratings firm said in a statement.

“This constitutes default under our criteria.”

The downgrade was temporary, however. Since new terms for the short-term debt came into effect immediately, S&P considers the default “cured” and will raise Argentina‘s long-term sovereign credit rating to CCC- on Aug. 30, it said.

The government will meanwhile postpone $7 billion of payments on short-term local notes held by institutional investors this year and will seek the “voluntary reprofiling” of $50 billion of longer-term debt, Economy Minister Hernán Lacunza said.

Hot potato

The rescheduling raised concerns locally over its effect on the national social security fund (FGS) and mutual funds, which have billions in short-term notes affected by postponed payments.

Morgan Stanley estimated Argentina needed $12.9 billion for repayments on bills and bonds in the last four months of the year. Most of those payments have now been pushed back to 2020 - when a new administration led by center-left Peronist Alberto Fernández is expected to be in office.

Tierra del Fuego Governor Rosana Bertone described the situation Fernández is likely to inherit in December as a “hot potato.”

Lacunza will also start talks over repayments on $45 billion borrowed from the IMF as part of a record, $57 billion bailout granted on June 2018.

Argentina has been largely cut off from global money markets since the April 2018 implosion of a domestic carry-trade debt bubble, promoted by Macri and known as the “financial bicycle.”

The peso has since lost two-thirds of its value, with GDP down 6.9% despite a record harvest.

At: https://www.bloomberg.com/news/articles/2019-08-29/argentina-s-rating-cut-to-selective-default-by-s-p

A cyclist rides down a street in the financial district in Buenos Aires.

The collapse of a $60 billion carry-trade debt bubble known locally as the “financial bicycle” led to Argentina's being mostly shut off from global bond markets - and what's widely considered a “disguised default.”

In effect, an inability to service its $200 billion public foreign debt (which more than doubled in just 3½ years) disguised only by $45 billion in IMF loans since June 2018.

The bailout was reportedly granted at the insistence of U.S. President Donald Trump, who shares both an ideological affinity and a 35-year friendship with Macri.

Sting condemns Brazil's handling of Amazon fires: 'We will all suffer the consequences'

Sting shared a statement condemning the Brazilian government’s response — or lack thereof — to the devastating fires raging across the Amazon rainforest.

In a note posted on Facebook, the musician heavily criticized President Jair Bolsonaro, a far-right climate change skeptic who has expressed contempt for the indigenous people of Amazonia, opened up the Amazon to deforestation and commercial exploitation and downplayed the global reaction to the ongoing fires.

As The New York Times reported, Bolsonaro also rejected a $22 million aid package to help fight the fires that French president Emmanuel Macron announced at the G-7 meeting.

Sting is a longtime advocate of rainforest preservation, having launched the Rainforest Foundation Fund in 1987, which has worked closely with indigenous communities in Brazil and across South America to protect their homes.

"Surely it is enlightened self-interest for Mr. Bolsonaro to understand and accept this," Sting wrote, referring to the need to protect the Amazon. "We urge him to rethink his policies and change his actions and his incendiary rhetoric before it is too late."

"This is no time for fiddling; the world is burning."

At: https://www.rollingstone.com/music/music-news/sting-brazil-forest-fires-amazon-bolsonaro-877207/

Sting and an Amazonian tribal leader during a 2009 protest against a proposed dam in the area.

He noted this week that "we are fast approaching the tipping point where the fires will continue to burn and cannot be put out."

Matthew McConaughey is now a college professor

Matthew McConaughey is taking his Oscar-winning expertise to higher education.

The University of Texas at Austin announced on Wednesday that McConaughey was appointed as a "professor of practice" at the Moody College of Communications, joining the faculty of the Department of Radio-Television-Film, according to a press release from the university.

The 49-year-old actor has been a visiting instructor since 2015, co-teaching the Script to Screen film production class alongside faulty member Scott Rice. McConaughey shared his enthusiasm for the new title in a statement.

"It's the class I wish I would have had when I was in film school. Working in the classroom with these students gives me a chance to prepare them," he said.

"Making movies, turning words on paper into film, is both a science and art -- no matter the time or generation. The elements of truth and genuine joy for the process are timeless. That will always be our classroom focus."

At: https://www.msn.com/en-au/entertainment/celebrity/matthew-mcconaughey-is-now-a-college-professor-find-out-what-class-hes-teaching/ar-AAGtttJ

Alright-alright-alright! Matthew McConaughey joins the University of Texas as a professor at the Moody College of Communications' Department of Radio-Television-Film.

Facing default, Argentina's Macri seeks debt rescheduling

Amid the worst economic crisis in nearly two decades and facing a likely default, Argentine Economy Minister Hernán Lacunza today announced that his office will be seeking a partial debt rescheduling.

The re-scheduling would affect $57 billion in debt - much of which currently yields 75% interest in pesos or 7% in dollars.

No principal reduction - or "haircut" - was proposed. Instead, Lacunza is seeking to swap $7 billion in debt maturing within the next few weeks for debt payable within 6 months.

A "voluntary reprofiling" of $50 billion of longer-term debt will also be sought.

Argentina's $330 billion public debt has grown 50% in 4 years and now consumes 16% of the national budget.

The high yield on these notes had made them popular investments until Monday - when only 5% of $1.6 billion in maturing dollar-denominated 'Letes' were rolled over.

Because the proceeds are largely being dollarized and wired overseas, these maturities are contributing to a rapid depletion of Argentina's foreign exchange reserves - which fallen by over $10 billion in August to $58 billion.

Net reserves, however, have dwindled to $13 billion - well below this year's projected current account deficit of $20 billion, as a result of mounting foreign debt interest outlays.

International Macri Fund

Lacunza also mentioned the possibility of rescheduling $45 billion in IMF debt, most of which is due by 2023.

This debt is part of a record, $57 billion bailout granted to Argentina in June 2018 - reportedly at the insistence of U.S. President Donald Trump, who sought to boost re-election chances for right-wing President Mauricio Macri (a longtime personal friend).

The political motivation behind the bailout led local critics to refer to the IMF as the "International Macri Fund."

Macri was instead dealt a drubbing by voters on August 11, losing by 16% to center-left candidate Alberto Fernández.

Fernández has repeatedly called on Macri to reschedule Argentina's $200 billion foreign public debt - the most problematic type, as it can only be serviced in dollars or other hard currencies.

Back to the Future

The proposals drew comparisons to Argentina's infamous, July 2001 "Mega Swap."

The Mega Swap involved an exchange of 37 types of notes and bonds for longer-term, higher-interest bonds. The swap was accepted by most bondholders, and delayed up to $30 billion in payments but added $38 billion in additional interest payments in the out years.

The Mega Swap was a boon to banks seeking to unload Argentine bonds – but failed to stem the crisis or avoid a default just six months later.

Of the $82 billion in defaulted bonds that had to be restructured in 2005 (triggering a wave of holdout lawsuits), 60% were issued in the Mega Swap.

At: https://translate.google.com/translate?hl=en&tab=wT&sl=es&tl=en&u=https%3A%2F%2Fwww.baenegocios.com%2Fpolitica%2FGobierno-anuncia-un-canje-de-deuda-para-estirar-los-vencimientos-20190828-0039.html



Argentine officials (left) discuss today's debt rescheduling proposal with visiting IMF officials.

Today's announcement, if enacted, will postpone some short-term, high-interest obligations until next year - when a new administration is expected to be in office.

Javier Milei, a libertarian Argentine economist, noted that "if a government fails to repay debts at the agreed-upon time and terms, and if, moreover, it swaps the debt at rates other than market rates, it's a selective default."

Meet James McManus, the 99-year-old dancer who loves to tango

At the age of 99, James McManus embraces his partner and grabs the spotlight when he glides across the floor with his elegant two-toned shoes at the World Tango Championship in Argentina's capital.

It's a dream come true for the Scotland-born tango aficionado.

Just a few months before his 100th birthday, his friends gave him a plane ticket to the birthplace of tango. He then decided to apply for the annual dance competition in Buenos Aires.

"They accepted the application and well, I just had a goal.... I knew I had no chance of winning, but I thought it would be a good experience," McManus told The Associated Press.

Argentina's world-famous tango emerged in the late 19th century in Buenos Aires, slowly permeating all social classes and gaining popularity locally and internationally in the 1920s.

McManus says he discovered the dance rather recently, in 2002, when he saw a couple dancing in Ireland, where he lives.

Since then, he hasn't been able to stop.

At: https://www.batimes.com.ar/news/argentina/meet-james-mcmanus-the-99-year-old-dancer-who-loves-to-tango.phtml

Two to tango: Scottish aficionado James McManus, 99, and his Argentine dance partner and friend, Lucía Seva.

Italian Prime Minister Giuseppe Conte resigns, leaving an unclear path forward

Italian Prime Minister Giuseppe Conte submitted his resignation Tuesday in a move that preempted a looming vote of no confidence called by his interior minister, the far-right Matteo Salvini.

If his resignation is accepted by Italy’s president, it will mark the end of Western Europe’s first fully right-wing populist government after just 14 months in power and throw the country into a renewed period of political instability at a critical moment in the continent.

The president’s office said late Tuesday that Conte has been asked to stay in his post temporarily as consultations over a possible new government were expected to begin Wednesday.

Conte’s departure could usher in a more moderate coalition government.

But it also has the potential to empower Salvini to make his expected bid to lead the nation further to the right ahead of critical budget talks with the European Union and amid an ongoing standoff with Europe over Salvini’s hard-line stance on migration.

At: https://www.washingtonpost.com/world/europe/italian-premier-addresses-parliament-as-no-confidence-vote-looms/2019/08/20/0275b9e4-c2b9-11e9-8bf7-cde2d9e09055_story.html

Outgoing Italian Prime Minister Giuseppe Conte and his deputy, Matteo Salvini.

Appointed only 14 months ago as a compromise with President Sergio Mattarella, the moderately conservative Conte had an uneasy relationship with his willful, far-right deputy.

Joseph Stiglitz: Argentina could avoid default if economy recovers fast enough

Argentina can avoid restructuring its bonds if policymakers reverse growth-stifling austerity measures in time, Nobel Prize-winning economist Joseph Stiglitz said on Monday.

A crushing defeat for business-friendly President Mauricio Macri in the August 11 primary election at the hands of his center Peronist rival Alberto Fernández (by 15.6%) unnerved investors.

The peso lost 20% of its value last week and Argentine bonds tumbled, pushing up borrowing costs - implying a 77% probability of a sovereign default within the next five years, according to IHS Markit.

GDP growth tumbled from 2.7% in 2015 (the year before Macri took office) to –2.5% in 2018, and –3.1% in the first half of 2019. Budget deficits, however, grew from 3.8% of GDP to 5.1% last year, swelled by rising interest outlays.

"The problem is that (Macri's) policies are not conducive to economic growth," Stiglitz told Reuters. "Austerity and the tight budgets lead to low growth and that makes the debt less sustainable."

Debt and Macrisis

From the very low level of foreign indebtedness left by Macri's predecessor, Cristina Kirchner, Argentina under Macri issued too much debt too fast, Stiglitz also noted.

"Macri began with an almost clean slate and he borrowed too much. He bet big and he bet wrong."

The country's public foreign debt ballooned in just three years from $85 billion to $200 billion - including a record $45 billion borrowed since June 2018 from the IMF, and most of it due in the next four years.

Fernández, now the front-runner for the election, warned on Sunday that a debt restructuring may be necessary.

"I think Fernández is unambiguously likely to have a better policy," said Stiglitz.

"Whether it's enough to avoid the need for a debt restructuring depends on how deep the hole is, that Macri dug over the last three-and-a-half years."

At: https://finance.yahoo.com/news/argentina-could-avoid-default-economy-101310584.html

Argentina's "business-friendly" incumbent, Mauricio Macri, and the likely winner of October's second round, Alberto Fernández.

If elected, Fernández, ahead by 20% in the most recent polls, will inherit a debt crisis not unlike those left behind by two previous right-wing governments: the last dictatorship (in 1983), and de la Rúa (in 2001).

"We can do this because it's exactly what Néstor Kirchner and I inherited in 2003," Fernández said, referring to the progressive president for whom he served as chief of staff.

"We've cleaned up the mess others left behind."

Video: California high-school students sang Nazi song and gave Hitler salute

A group of high-school students in Southern California gave a Nazi salute and sang a Nazi song during an awards ceremony last year, according to video reivewed by The Daily Beast.

The video shows about 10 members of the boys’ water polo team at Pacifica High School in Garden Grove, California, throwing the salute once used to greet Adolf Hitler while singing a Nazi marching song played for German troops during World War II.

It’s the second such incident in the region in the year.

Rabbi Peter Levi, director of the Anti Defamation League’s Orange County chapter, criticized the school for apparently failing to address the incident with the community.

“Generally speaking, especially when something like this involves a group, we would think a more meaningful approach would be to use this as a learning opportunity, to state what our values are,” continued the rabbi.

“This requires investigation and conversation… We’d like to see a more systematic response.”

At: https://www.thedailybeast.com/pacifica-high-school-students-sang-nazi-song-and-gave-hitler-salute

Argentina's Macrisis: Economy Minister Nicolas Dujovne out

Amid the deepest economic crisis in nearly two decades and an electoral rebuke, Argentine President Mauricio Macri dismissed Economy Minister Nicolás Dujovne today.

The dismissal followed a stinging 16% loss in Sunday's first presidential round to center-left challenger Alberto Fernández, as well as a 27% jump in the dollar against the peso over the past week.

After numerous federal officials reportedly rejected the post, Dujovne will be replaced by Buenos Aires Province Economy Minister Hernán Lacunza.

The media-savvy Lacunza, 50, served as economy minister for Governor María Eugenia Vidal - a close ally of the right-wing Macri administration who, like Macri, was soundly defeated in Sunday's polls, losing to economist Axel Kicillof by 18%.

Lacunza has reaped criticism for raising provincial debt levels from $9 billion when Vidal took office in 2015, to $12 billion currently.

A 500% jump since 2015 in the dollar against the peso has made the province's debt increasingly difficult to service.

Troubled tenure

Dujovne, 52, was appointed in January 2017 after steep utility rate hikes led to a recession in 2016 - Macri's first year in office.

His appointment was widely seen at the time as a signal to newly-inaugurated U.S. President Donald Trump, whose son Eric hired Dujovne's father, Berardo, in 2012 to design Trump Tower Punta del Este (in neighboring Uruguay).

Dujovne loosened his predecessor's austerity policies somewhat, helping spur growth to 2.9% in 2017 - and in turn yielding Macri's right-wing “Let's Change” caucus a strong showing in mid-terms that October.

Budget and current account deficits for 2017, however, ballooned to a record $38 billion (6% of GDP) and $31 billion, respectively - leading to Argentina's sudden expulsion from foreign bond markets in February 2018, and a consequent collapse in a $60 billion carry-trade debt bubble that April.

Dujovne was one of several Macri officials listed in a tax “whitewash” (amnesty) scandal, and was later found to have declared his upscale Buenos Aires home as a vacant lot for tax purposes.

He survived the scandals and the worsening crisis - even as calls for his resignation mounted following his negotiation of a deeply unpopular (and record) $57 billion IMF bailout in June 2018.

The bailout added to Argentina's mounting foreign debt but failed to prevent a recession, as GDP plunged 5.8% by the first quarter of 2019 and 300,000 registered jobs were lost.

Soaring interest charges meanwhile derailed efforts to balance the budget - a centerpiece of the IMF agreement - and of the $45 billion borrowed from the IMF thus far, over 70% financed capital flight.

His last policy proposal - a short-term stimulus package of tax cuts and price controls coinciding with a second round of voting this October - was described by Daniel Rivarola, a retail workers' union official, as “a glass of water to put out a fire.”

At: https://translate.google.com/translate?hl=en&tab=wT&sl=auto&tl=es&u=https%3A%2F%2Fwww.pagina12.com.ar%2F212910-hernan-lacunza-reemplaza-a-nicolas-dujovne-como-nuevo-minist

Argentina's new Economy Minister, Hernán Lacunza.

He replaces IMF favorite Nicolás Dujovne, fired today by President Mauricio Macri in response to last week's electoral drubbing and currency crisis.

Argentina's Macri alleged to have allowed peso to plummet for political reasons

Former Argentine Central Bank President Martín Redrado stated today that government sources disclosed to him that President Mauricio Macri ordered the central bank not to intervene during a selloff in the peso on Monday for political reasons.

Macri's alleged decision was made the morning after a drubbing in the first round of presidential voting on Sunday.

Confounding most polls and amid high turnout, Macri lost by 15.6% to center-left opposition candidate Alberto Fernández - making the pragmatic Fernández the likely winner of a second round on October 27.

"There was a political order on Monday to allow the exchange rate to float, creating a megadevaluation," Redrado stated.

"The President said on Monday that 'the dollar will go where it has to, such that Argentines may learn whom they voted for'."

Self-inflicted

Redrado, 57, served as central bank president between 2004 and 2010.

His allegation echoed statements made on Wednesday by Luis Caputo, who headed the central bank from June to September 2018 - and is the first cousin of Macri's best friend, Nicolás Caputo.

"The fall (in the peso) was exaggerated - and self-inflicted. It can't be that the central bank allows the dollar to rise by 5 or 8% due to a $5 million trade."

The dollar climbed 23% on Monday, from 46.55 to a record 57.30 pesos - its sharpest since Macri's own, December 17, 2015, devaluation just a week after taking office.

But trading volumes were moderate in Buenos Aires' official foreign exchange market (MULC): $550 million (including public sector sales), compared to an average the previous week of $800 million a day.

The Argentine National Bank, the country's largest, offered dollars at 51 pesos when the market opened on Monday (9.5% above Friday's close).

Absent official intervention, the dollar rose sharply in early hours to an intraday record of 63 pesos - until a $105 million central bank dollar sale at 1:30 p.m. reversed the trend, helping ease the dollar to 57.30.

The dollar closed today at 58.12.

"The central bank was obligated to sell $250 million should the dollar rise above 51.45 pesos - the currency band ceiling agreed to with the IMF," Redrado pointed out. "None of this happened."

Hoarding has been reported since Monday's devaluation, projected to push inflation from 2.2% monthly in July to 14% in August - the highest in 28 years.

Ratings agency Fitch today downgraded Argentina’s sovereign debt rating from B to CCC, calling Argentina's bond default risk "substantial."

At: https://translate.google.com/translate?hl=en&tab=wT&sl=auto&tl=en&u=https%3A%2F%2Fwww.politicargentina.com%2Fnotas%2F201908%2F30180-redrado-denuncio-que-macri-dejo-correr-el-dolar-para-que-los-argentinos-aprendan-a-quien-votar.html

Macri (second from left) and his top allies feign optimism during an election night rally after an unexpectedly severe drubbing on Sunday.

The central bank's inaction the next morning, which led to a 23% jump in the dollar against the peso on Monday, has led to calls for an investigation.

Macri, according to at least one insider, sought to "teach voters a lesson" and believed a sudden crash in the peso might turn the electorate against Sunday's winner, Alberto Fernández.

Polling instead shows voters holding Macri responsible for the crash, by 59% to 28%.

Other critics point to the fact that Macri and many of his top officials keep most of their assets abroad and in dollars - making them instant beneficiaries from a shock devaluation.