Argentina’s Foreign Minister Rafael Bielsa said a majority of the Group of Seven industrialized nations backs the country’s debt exchange plan. This comes as the IMF is pushing Argentina to start talks with creditors who rejected the swap offer. Bielsa said the restructuring plan is backed by Germany, the US, France and Canada, while the UK and Japan have given “mixed” signals. Italy opposes the offer. Argentina persuaded 76 percent of its bondholders to exchange their holdings for new securities, while holders of about $20 billion in bonds rejected the offer.
Category: Daily Brief
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IMF Lifts Forecasts
The International Monetary Fund raised its growth forecasts this year for Mexico and Brazil, predicting that both countries’ economies will expand 3.7 percent, more than the previous 3.2 percent forecast for Mexico and 3.5 percent outlook for Brazil. The IMF called on Latin American countries to take advantage of the economic expansion in the region to reduce debt and broaden the tax collection base to help keep budget deficits under control.
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Varig Reports Results
Brazil’s troubled airline Varig registered net revenue of $3.4 billion in 2004, up 11 percent year-on-year. The company reduced its net loss 95 percent to $34 million, while gross profit totaled $980 million, up 10 percent. Varig finished 2004 with debts worth $2.2 billion, most of which are owed to the Brazilian government.
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Brasil Telecom CEO Charged
Brasil Telecom Chief Executive Carla Cico was charged with racketeering as part of a Brazilian probe into whether she hired security firm Kroll to spy on the government and executives at Telecom Italia, a business rival. The charges must be confirmed by a court, which could take months. The 44-year-old executive is the first executive to be charged in a police investigation into whether Kroll used illegal methods such as wiretapping to gather information on both the government and Telecom Italia.
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Jay Collins Gets New Post
Citigroup has appointed Jay Collins as head of its Public Sector Group, a division of the bank originally created for Stan Fischer, the former first deputy managing director of the International Monetary Fund. Fischer left Citigroup to become president of the Central Bank of Israel. Collins was previously a banker at Nikko-Citigroup’s investment banking division and was chief operating officer for Latin America.
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Venezuela Sells Bonds
Venezuela sold $1.6 billion of 20 year dollar-denominated bonds to domestic investors last week. President Hugo Chavez is tapping domestic banks and other investors who have excess cash because of two-year-old restrictions on dollar purchases in Venezuela. The government has sold $4.5 billion of 15-year, seven-year and six-month dollar bonds to local investors over the past two years, the first ever such sales in the domestic market.
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Brazil’s Inflation Rises
Brazil’s inflation rose .61 percent in March, up from .59 percent in February. The annual inflation rate rose to 7.54 percent, within 0.1 percentage point of a 14-month high. The central bank wants to bring inflation down to its target of 5.1 percent. It’s set to make its next decision on interest rates April 20.
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Lavagna Stands Firm
Argentina’s Economy Minister Roberto Lavagna rejected calls by the International Monetary Fund to hold further talks with bondholders who turned down the country’s debt restructuring offer. An IMF spokesman on April 8 said Argentina should “develop a realistic strategy” to resolve the demands of non-participating bondholders. Argentina earlier this year agreed to swap $62.3 billion in defaulted debt for new securities, which the country says ends its three-year default. About 20% of bondholders rejected terms and some are suing the government in US courts to demand full repayment.
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Brazilian Bonds Gain
Brazil’s benchmark bond due in 2040 rose $1.10 to $114.20 after US Fed policy makers played down inflation fears and hinted they would continue raising interest rates at a measured pace. Yields on US 10-year Treasuries fell to a five-week low, helping lure investors to higher-yielding emerging market bonds. The extra yield investors demand to hold a Brazilian 10-year bond instead of a similar maturity Treasury has narrowed to 3.45 percentage points from 4.12 percentage points on March 28.
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León Opposes Chavez Plan
Venezuelan Central Bank director Armando León urged President Hugo Chávez to alter his plan to use foreign currency reserves for social spending, saying the government should set aside windfall oil exports before they’re converted into reserves. Chávez wants to take $7.5 billion in “excess reserves” from the Central Bank to spend on infrastructure and social programs targeting the poor. The Central Bank’s foreign reserves have almost tripled to $25.7 billion from $9.3 billion in March 2002.