With 9% Growth Argentina’s Risk Falls and Brazil Is Left Behind

Argentina's rate risk dropped Friday below that of neighboring Brazil, a day after the successful floating of sovereign bonds totaling US$ 500 million, at the lowest interest rate since August 2005.

The country risk is the extra rate (percentage points) that must be paid – taking as reference the US Treasury bonds – and therefore gauges investors' confidence in the country's bonds.

According to the JP Morgan Index, Argentina reached on Friday a minimum 182 points risk rate (1.82 percentage points above US Treasury bonds), five points less than on Thursday and below the 187 points of Brazil.

Contrary to Brazil Argentina in 2002 defaulted on sovereign bonds valued over US$ 100 billion and after long and complicated negotiations managed to restructure its liabilities by 2005, with a significant cut in the bonds' face value.

The proposal, which managed a 76% adherence of creditors, allowed Argentina to drastically reduce the cost of servicing the debt and extend in time maturing dates.

Although some US$ 20 billion are still in the hands of bond holders that refused to accept the exchange of bonds, investors find Argentine assets interesting and trust the country's capacity to service them based on a strong economic expansion and fiscal solvency.

Last Thursday Argentina floated US$ 500 million in 2013 bonds with an implicit interest rate of 7.71% paid twice annually. Argentina since 2003 has been growing at a rate in the range of 8 and 9%. For 2007, the Argentine Central Bank estimated the economy will expand at least 7.5%.

In related news it was reported the Argentine Central Bank ended 2006 with record international reserves in the range of US$ 32.03 billion.

Reserves stood at US$ 28.1 billion towards the end of 2005, but last year the President Kirchner administration decided to cancel all credits pending with the International Monetary Fund and repaid US$ 9.5 billion.

The Central Bank points out that contrary to previous situations the recovery of international reserves is simultaneous to the canceling of pending debt in foreign currencies. Trade surplus was the main source for the increase in reserves.



You May Also Like

Brazil’s National Referendum Challenges Privatization of Mining Giant CVRD

From September 1st to 9, social movements from all over Brazil held a popular ...

Haiti Is Giving Brazil a Chance to Prove Its Mettle Beyond Cheap Talk

After a promising beginning that included, among other accomplishments, being the second country in ...

Brazil wants better trained workforce in dairy sector

Family Tradition Not Enough: Brazil Sends Its Dairy Farmers to School

The region of São Luiz dos Montes Belos, in the mid-western Brazilian state of ...

Lula Blames “Wise Guys” from Rich Countries for Global Crisis

The president of Brazil, Luiz Inácio Lula da Silva thanked, the United Nations for ...

Brazil Varig’s Situation Much Worse Than Expected, Says Expert

Professor Ricardo Teixeira, a Brazilian expert in business administration at the Fundação Getúlio Vargas, ...

US Missionary Murdered in Brazil Gets UN Human Rights Prize

Dorothy Stang, an American nun murdered in Brazil three years ago and the slain ...

Brazil’s State Firm Embrapa Creates 14 Transgenic Species. Seeds Are for Sale.

In a special program, "Soybeans – A Big Business," broadcast on Friday, January 20, ...

Brazil Expecting Half-Percentage Cut in Key Interest Rate

The Brazilian Central Bank’s Monetary Policy Council (Copom) begins its first meeting of 2006 ...

Brazil Reduces Malnutrition and Increases Number of Overweight Children

Over the last 30 years child malnutrition has been reduced in Brazil, especially in ...

A biodiesel factory in Brazil

A Whole Lot Going on in Africa Courtesy of Brazil

Last December Morocco became the first Arab country in North Africa to establish a ...