Connect to share and comment

Escaping from the 2001 debt crisis?

A debt swap could finally free the country from financial exile caused by the 2001 default. Argentina and China fight over soy. Inflation is expected to rise. And is Lionel Messi the world's greatest soccer player?


Top News: President Cristina Fernandez de Kirchner visited the United States ahead of a historic debt -swap to be launched Wednesday or Thursday this week. The government will try to settle over $20 billion in unpaid debts left over from the 2001 financial crisis. If Argentina's holdout debtors accept these new terms , the debt- swap could herald Argentina's return to the international credit markets since it defaulted on $95 billion in bonds nine years ago.


Argentina and China continue their spat over soy: China's appetite for soybean oil is insatiable and Argentina is the world's biggest exporter.The two countries need each other, but Argentina's  protectionist policies against Chinese imports have angered China. Last week, China halted Argentine soybean oil imports. The two countries are at a standstill with Brazil and the U.S. unable to produce oil to ease Chinese demand until next year. The dispute is not likely to end easily.


Meanwhile dry weather after hearty rains this year have produced record soy harvests for Argentina as well as Brazil  - two of the world's top three soy producers.


Money: This week Argentina is restructuring over $20 million in defaulted debt, left over from the crisis of 2001. It heralds the return of Argentina to the overseas credit market since 2001. The debt swap has investors drooling and speculation is high.


Ahead of the debt-swap, a US court ruled last week that Argentina's bond holders can seize $105 million in Argentine bank deposits held in the United States. Argentina plans to appeal, but the decision is historic in that the court decided the country's Central Banks lacks independence. This could expose Argentina to other debt seizures should the debt swap not go through as planned this week. Economy Minister Amado Boudou said the court decision will not affect the debt swap, although the court decision drove down bond prices.


Ironically, the judge's decision is based in part on President Cristina Fernandez's own decision to pay down debts using Central Bank reserves, which resulted in the resignation of the central bank chief last January.


As the government prepares to resolve international debts this week, a debate rages at home as to how generous the government's terms should be regarding debt settlement.  Analysts say that rising commodity prices make Argentina's GDP warrants potentially good investments. These warrants pay out when economic growth rises above 3 percent and Argentina's economy is projected to grow 4.3 percent this year, Bloomberg reports.


Yet as the Argentine economy seems to rebound from recession and spending increases, analysts say inflation and a devalued peso is likely to continue hurting Argentine consumers this year.  Inflation last February was at a four-year high and independent analysts say inflation is expected to rise more than 20 percent this year.


Elsewhere:  Argentine soccer player Lionel Messi has taken the world by storm after last week's European club play. His performances last week for Spanish club team Barcelona have sparked a soccer history debate as to whether the 22-year-old will become the  world's best soccer player of all time. 


Commentators have been quick to note that Diego Maradona, the other giant in Argentine soccer and coach of this year's World Cup team, might not like sharing the spotlight. Yet Maradonna was quick to praise Messi's performance, saying the youth was "playing kic-about with Jesus."  


In other news, two robbers managed to  escape from a maximum security prison and evaded capture by dressing up as sheep. Yup, the proverbial wool was pulled over a few eyes on that one.