Banker to the World Bill Rhodes Counting on Argentina Turnaround

23 Dec 2015 | Author: | No comments yet »

Argentina’s peso tumbles after government lifts dollar limits.

BUENOS AIRES, Argentina (AP) — A look at the winners and losers from the sharp devaluation of Argentina’s peso Thursday following the lifting of currency controls: Any business that exports is likely celebrating. William Rhodes, the former Citigroup Inc. executive who helped restructure hundreds of billions of dollars in debt over three decades, says Argentine President Mauricio Macri is making him optimistic about the country’s future.A day after dropping 27 per cent following the move by Mauricio Macri, the country’s newly elected president, to lift capital controls late on Wednesday night, the peso has only weakened by another 0.4 per cent on Friday to 13.39 per dollar.Argentina’s currency sharply devalued against the U.S. dollar on Thursday as the new administration lifted deeply unpopular limits on the buying of foreign currencies, a major change that will expose Latin America’s third-largest economy to international market forces in ways not seen in more than a decade. Rhodes, 80, who described leading Argentina’s debt restructurings in the 1980s and 1990s in his book “Banker to the World,” said that despite the nation’s history of false starts, Macri will follow through on his plans to normalize the economy and lure investment.

The modest decline – the market had expected the currency to crumble to as low as 14 per dollar – suggests that there is little sense of the market panic that accompanied the currency’s last devaluation in January, 2014. After devaluing the currency by the most in 14 years Thursday, Macri will have to move swiftly to settle with leftover creditors from its 2001 default and improve Argentina’s fiscal accounts, Rhodes said in an interview from New York. “Macri will do what he says as rapidly as he can, given he’s got an opposition congress,” said Rhodes, who is a senior adviser at Citigroup and chief executive officer at William R. It also suggests a certain level of confidence and support for Mr Macri’s ambitious plan to revive the ailing Argentine economy and win back investors’ trust. Because international markets are largely conducted in dollars, and all business in Argentina was done at the official exchange rate, exporters experienced a constant “haircut” in the payments for their products. Supermarket shoppers said Friday they’ll have to buy less of some products like bread and even cut out some things like beef, practically sacrilegious in a country known for its choice meats.

Rhodes Global Advisors LLC. “At the end of the day, if you can’t deliver growth in a reasonable amount of time, the population will turn against you. Attempting to stop capital flight, the preceding administration of President Cristina Fernández de Kirchner instituted the restrictions on buying foreign currency in 2011. He’s battling the clock.” Macri, the center-right former mayor of Buenos Aires, took office Dec. 10 after campaigning on a pledge to revive South America’s second-biggest economy and overcome rampant inflation, a growing deficit, and falling foreign reserves. People who wanted to buy dollars, a common practice in a South American country with a long history of financial collapses, had to meet several requirements.

The 14-year-old standoff with U.S. hedge funds holding defaulted Argentine bonds has made the nation a pariah in international credit markets, and a settlement with holdout creditors offers the only path for Argentina to borrow the money it needs to repair the economy. Caivano) Gisela Guana, a 26-year-old maid, said that earlier this week she could buy bread for 13 Argentine pesos (US$0.92) per kilogram (42 cents a pound). Newly-appointed Finance Minister Alfonso Prat-Gay, who led global currency research at JPMorgan Chase & Co. until 2001, this week largely removed the currency controls put in place by former President Cristina Fernandez de Kirchner.

The restrictions had hampered businesses by making it difficult to get dollars for imports and spurred the creation of multiple exchange rates that individuals and companies used to skirt the controls. Third, the fact that the peso settled at lower-than-expected levels is a good base to negotiate price increases with local companies and wage increases with unions. The move to roll back capital controls is the most ambitious move yet by Mr Macri towards opening up Argentina’s economy since he was sworn-in as president on December 10.

So between his election victory on Nov. 22 and his inauguration on Dec. 10, supermarkets had been increasing prices to brace themselves for a devaluation. While he says that “restructuring Argentina has never been an easy task” — in his 2011 book he described pulling back-to-back all-nighters when finalizing the restructuring of the nation’s debt into so-called Brady bonds — the incentives for both parties to come to an agreement will drive a deal.

While analysts and economists caution that Mr Macri faces many near-term challenges – including taming double digit inflation, rebuilding the country’s depleting foreign reserves and reversing the economic slump – the policy changes he has made so far should boost growth in the long run. Several businesses, from textile factories to construction companies, simply shut down, figuring it was better to see what happened with the peso rather than risk decisions that might later be costly. Macri has already moved to end taxes on most agricultural exports and signaled he’ll reduce subsidies on utility bills, which have contributed to the the country’s widening fiscal deficit. International Monetary Fund chief Christine Lagarde has been ordered to face trial for “negligence” in relation to a settlement the French government reached with businessman Bernard Tapie during Lagarde’s time as finance minister, a French court said Thursday. We expect a fast correction of external imbalances, after the recent FX [foreign exchange] announcements, and an agreement with the [creditor] holdouts by 3Q16.

Pablo Micheli, leader of the large Argentine Central Workers union, demanded a 5,000-peso (US$357) bonus for workers as compensation for the devaluation. The trial concerns Lagarde’s 2008 decision to allow an arbitration process to end a dispute between Tapie, a supporter of then-President Nicolas Sarkozy, and former state-owned bank Credit Lyonnais. The outlook for the prices on the commodities that Argentina depends on to bring foreign currency into the country isn’t great as growth in China slows. “One should not underestimate the obstacles he has internationally as well as those domestically,” Rhodes said. “It’ll take time, but he’s been preparing for this day for a long time, he’s assembled a good team, and he’s going to work at it. Argentina is one of the most visited nations in South America, with several million tourists coming each year to enjoy tango dancing to rodeo shows to typical barbeques. At the fund’s annual meeting in October, Lagarde said she would be open to serving another term. ● AstraZeneca has agreed to buy 55 percent of the privately held biotech firm Acerta Pharma for $4 billion to give it access to a new kind of blood cancer drug, boosting its long-term growth at the cost of a near-term hit to earnings.

Everything is very expensive, said Alicia Fernandez, a 58-year-old lawyer who says she frequently visits her adult children living in Florida. “In the United States, with US$100 you can fill up your shopping cart. The deal gives AstraZeneca chief executive Pascal Soriot a promising new medicine as he seeks to bolster investors’ confidence after having turned down a takeover bid from Pfizer. ● Federal health officials have cleared a wearable heart-zapping device for children at risk of deadly irregular heartbeats. The company also announced that it hired Tor Myhren from the advertising company Grey Group to be vice president of marketing communications. ● Facebook is trying to make it easier to send photos as the holiday season’s picture-taking frenzy escalates, offering a feature called “Photo Magic” that will automatically address a message so it can be sent quickly to Facebook friends identified in a picture.

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