The collapse of talks with a group of private investors from the US sent Argentina into its second debt default in 13 years last night. The US lenders (investors) were some of the first creditors for Argentina after it defaulted in 2001. Now, the markets are trying to put a value on the uncertainty of what comes next for financial markets world wide and Argentinas staggering economy. Argentine President Cristina Fernandez had long refused to negotiate with the US creditors, often calling them vultures for picking on the carcass of the countrys record $100 billion default in 2001. They may be vultures, but they were they only people willing to loan Argentina money in financial chaos after its default in 2001 and Argentina accepted the terms. There were a few hours last night when markets thought default would be avoided when Argentinas private banks association, ADEBA, said it was ready to make an offer to buy out the debt owed to the US hedge funds. However, after analyzing the quality of that debt and the attitude of Fernandez toward people with money, they decided buying that debt would be idiotic. Argentina has one of the worlds largest deposits of shale oil and gas, which, if developed would solve Argentinas unemployment, cash flow and sluggish economy problems. However, hardly any oil and gas company is interested in developing the energy field because the Argentine has a history of nationalizing (stealing) successful businesses. Grupo Repsol is an energy company based in Madrid, Spain, which invested heavily in Argentinas energy development beginning in 1999. On April 16, 2012 the President of Argentina, Cristina Fernandez de Kirchner announced the introduction in the Congress of a bill to safeguard the sovereignty of Argentina hydrocarbons. With a stroke of the pen, this legislation gave ownership to Argentinas government of 51% of the shares of Grupo Respols Argentine company, YPF. Doesnt that make you want to go to Argentina and start a business? Socialists around the world and here in the US just do not understand you cannot keep taking money away from people and businesses who work because eventually they will quit working. Argentina has learned that default a second time is a lot easier to accept than it was the first time, as is everything in life. As far as grain markets are concerned, Argentinas largest problem is the value of the Argentine peso, which continues to drop like a rock. Argentine agriculture producers have been hoarding grain in recent months as an inflation hedge, which keeps Argentinas grain hanging over the market like a club waiting to fall. The hoarding also deprives the federal government of much needed export tax revenues. Inflation is expected to average 40% in 2014.
Posted on: Thu, 31 Jul 2014 15:08:45 +0000
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