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Member since: Tue Dec 30, 2014, 06:11 PM
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Brazilian GDP shrank 3.8% in 2015, the largest annual contraction in 25 years.

Brazil's economy contracted sharply in 2015 as businesses slashed investment plans and laid off more than 1.5 million workers, official data showed on Thursday, setting the stage for what could be the country's deepest recession on record.

Gross domestic product (GDP) shrank 3.8% last year, capped by another steep contraction in the fourth quarter, according to Brazilian statistics agency IBGE. It was the worst performance of any G20 nation in 2015.

It was also Brazil's largest annual contraction since 1990, when the country was struggling with hyperinflation and a debt default. The outlook for 2016 is nearly as bad, with a central bank survey forecasting a 3.45% contraction. Back-to-back annual drops of that magnitude would amount to the longest and deepest downturn since Brazil began keeping records in 1901.

Brazil is "replicating the lost decade of the '80s in just two years," Goldman Sachs economist Alberto Ramos said in a research report. He added that the economy was close to an outright depression given that its contraction began nearly two years ago. A paralyzing political crisis, rising inflation and interest rates and a sharp drop in prices of key commodity exports have formed a toxic cocktail for Latin America's largest economy.

The disastrous burst of a major mining dam and the biggest oil strike in 20 years added further strain in 2015. Brazil's government said the poor data had been expected and added that it was focused on boosting the economy this year. "We want 2016 to be a year of recovery for jobs, employment, income, with economic growth," Labor Minister Miguel Rossetto said.

At: http://buenosairesherald.com/article/209955/brazilian-gdp-shrank-38-in-2015-the-largest-annual-contraction-in-25-years

Argentina seeks $15 billion bond issue to pay holdouts; deal must be approved by Congress.

Argentina is on the verge of issuing the largest sum of debt by any developing nation since 1996 as the country seeks to end a long-running and rancorous debt dispute by paying for it by raising fresh credit on global financial markets, the question is what interest rate Buenos Aires will be forced to pay after a 15-year market hiatus.

On Monday, Argentine President Mauricio Macri agreed to a $4.65 billion cash payment for four “holdout” creditors who refused to restructure debt in 2005 or 2010, paving the way for Argentina to regain access to international debt markets for the first time since its default in 2001. The principal holdout litigant, Paul Singer’s Cayman Islands-based NML, bought $48 million in defaulted 2001 Argentine bonds in 2008 and stands to receive over $3 billion in payouts from the Macri offer.

Once the total cost of the accord has been calculated, Argentine Finance Minister Alfonso Prat-Gay has said it will be funded through $15 billion of new bonds. Further debt issuance to fund government spending and boost reserves is expected later in the year. This would make Argentina the largest issuer of hard currency bonds in emerging markets since Mexico borrowed $16 billion 20 years ago, according to data provider Dealogic.

Before any debt is issued, however, Argentina’s deal with bondholders must gain approval from Congress. Macri must also ask Congress to reopen a bond swap to accommodate holdouts, and to rescind the Sovereign Payment Law. The law allowed many regular bondholders whose payments had been blocked since 2014 by Lower Manhattan Judge Thomas Griesa at the holdouts' behest to start collecting their payments in Buenos Aires or Paris.

Since 2013, however, markets in Buenos Aires have rallied, lifting Argentina’s existing bonds out of crisis territory. Bonar 2024 bonds, a possible point of comparison to new 10 year debt, yield 7.9%. The scale of borrowing required to pay holdouts, however, means any hope the government has of borrowing money at less than 8% a year may be dashed, said Sergio Trigo Paz, head of emerging markets fixed income at BlackRock, the world’s largest fund manager. “We’re very happy that Argentina has reached an agreement with bondholders,” he said. “But with such a significant amount of debt to issue it will have to look at a higher clearing price.”

“Argentina has a reformist government and it is staffed by ex-Wall Street people who know what they are doing but it still hasn’t fixed up its economy,” said Greg Saichin, head of emerging markets fixed income at Allianz Global Investors. “They will expose themselves if they bring too much paper to the market in one go. I’d advise them to start with an $8 billion sale.”

By the end of the year, Argentina may have issued as much as $20 billion, according to estimates by Alejo Costa, chief of research at Puente, a Buenos Aires brokerage.

At: http://webcache.googleusercontent.com/search?q=cache:t_-LORz3egoJ:www.ft.com/cms/s/0/2869acbe-dfbe-11e5-b67f-a61732c1d025.html+&cd=1&hl=en&ct=clnk&gl=us#axzz41nPFFaCn

This $15 billion in new debt - at 8% interest - isn't being taken to finance public works, education, social programs, or even the budget deficit. It's being taken on to give holdout bondholders - mostly, money-laundering vulture funds - payouts that range from 1,000% in most cases, to over 6,000% in the case of Paul Singer's Cayman Islands-based NML.

Singer, btw, was just named National Finance Chairman by the Narco Rubio campaign.

Vulture fund billionaire Paul Singer to become Rubio campaign national finance chairman.

Paul Singer, the hedge fund billionaire from New York who endorsed Marco Rubio in October, is set to be named as his national fianance chariman according to various US press reports yesterday. Singer is know in Argentina for bringing a lawsuit against the government in the holdouts dispute.

US daily Político yesterday reported that the announcement will be made at a quarterly gathering of Rubio donors in Miami on March 10. The infomation was provided to the political newspaper by campaign worker Mike Allen. Político suggested that this is a clear sign that the GOP’s Wall Street establishment is closing ranks around Rubio in a bid to derail Trump’s march to the nomination. The newaspaper’s analysts however criticized the move as coming far too late.

The decision also shows just how willing Rubio is to risk voter backlash in order to continue raising money for his campaign. “The move is sure to spark controversy among Christian conservatives because super-PAC donor Singer is a gay-marriage advocate and a supporter of LGBT,” said New York Post columnist Emily Smith.

Singer, who has a gay son, is part of a group of conservative Wall Street hedge fund managers who are vocal supporters of LGBT rights. Singer, who lives in New York, announced he was throwing his support to Rubio last October and has since emerged as one of the Florida senator’s top financial backers. The hedge fund billionare said Rubio was the only candidate who can “navigate this complex primary process and still be in a position to defeat” Hillary Clinton.

At : http://buenosairesherald.com/article/209857/singer-to-become-rubio-campaign-chief

Despite devaluation touted as a reserve booster, Argentine reserves down $1.7 billion in February.

Lower than expected deposits from an agro-export sector flush with President Macri's sharp devaluation and tax cut decrees, as well as ongoing pressure by speculators seeking to accelerate the pace of devaluation, resulted in a decline of $1.686 billion in Argentina's Central Bank reserves in February.

Excluding a $5 billion, high-interest credit line extended to the right-wing Macri administration in January by a consortium of U.S. banks, the Central Bank's international reserves thus ended the month at $23.385 billion - the lowest figure since May 2006.

The Central Bank was forced to shed $171 million in reserves on February 29 alone, as it struggled to contain a run on the peso. The Macri administration had expected Friday's announcement of an agreement in principle with vulture funds for a $4.65 billion payout to shore up confidence.

Instead, the Central Bank was forced to intervene in the exchange market with $200 million on Monday - but failed to contain the escalating exchange rate. The dollar rose another 23 cents to a record 15.86 pesos yesterday, up 62.5% since President Macri took office on December 10 (when it was 9.76).

Reserves also came under pressure from sputtering deposits from Argentina's cereal and oilseed exporters, which in 2015 earned around a third of the country's foreign exchange. Daily export revenues declined steadily from $110 million during the first week of February, to $70 million by the week ending February 26 - a 13% decline from the same time a year ago.

A vicious circle thus emerged in February between devaluation expectations on one hand, and the slowdown in agro-export income on the other. Dollar Rofex futures for December 2016 jumped from 17 to 19 pesos in the last four weeks alone, and this trend in turn prompted the country's agricultural export sector to increase stockpiles of cereals and soy for speculative purposes.

Campaign promises and sticker shock

The practice of grain stockpiling was made into a hot-button issue by the Macri campaign last year, and Macri repeatedly promised that a sharp devaluation would encourage exports and boost reserves with no effect on Argentines' purchasing power. The rising dollar, however, has led to a sharp increase in the country's already high inflation rate. Food prices have been particularly impacted, with the retail price of many basic staples rising by over 30% and beef rising by over 100% since November.

The sharp increase in the price of beef was dramatized recently by an incident in which former Vice President Julio Cobos, who endorsed Macri, took to Twitter on February 21 to express outrage at finding that eye of round had jumped to 180 pesos a kilo ($5.30 a pound) and skirt steak, to 220 pesos ($6.50 a pound). These cuts typically sold for 70 and 85 pesos, respectively, in November.

At: https://translate.google.com/translate?hl=en&sl=es&u=http://www.pagina12.com.ar/diario/economia/2-293529-2016-03-01.html&prev=search

Argentine consumer confidence plunges 15.6% in February; down almost 25% since November.

The Torcuato Di Tella University Business School's Financial Research Center (CIF) reported that the Index of Consumer Confidence fell in February to 45.6, a 15.6% decline from January and a 24.5% plunge from 60.4 in November.

The report pointed to the sharp run-up in prices since President Mauricio Macri ordered a 40% devaluation on December 17 as the principal cause for the decline in consumer confidence. Macri refuses to publish inflation data; but private estimates projects that inflation will reach 40% this year, up from 25% in 2015.

The drop in confidence was especially severe for purchasing durable goods or real estate, the index for which fell 33.1% last month. Sizable declines were also registered for the other two components in the index: 12.4% less confidence in respondents' personal financial situation, and 9.7% less confidence in macroeconomic conditions.

The index also registered noticeable regional disparities, with respondents outside the Buenos Aires metro area registering a 7.9% decline in confidence; those in Buenos Aires, by 12.4%; and those in predominantly working class Greater Buenos Aires, 20.8%. Indeed, those earning below the median income suffered a decline in confidence of 17.1%; while those earning more income saw confidence fall by 13.3%.

The CIF consumer confidence index, published monthly since March 2001, has averaged 47.3 over the last 15 years, reaching an all time high of 61.0 in January 2007 and a record low of 28.4 in September 2002.

At: https://translate.google.com/translate?hl=en&sl=es&u=http://www.politicargentina.com/notas/201602/11972-fuerte-caida-del-ndice-de-confianza-al-consumidor.html&prev=search

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