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Reuters
3 days ago
- Business
- Reuters
Argentina takes baby step toward financial order with pricey $1 billion debt auction
NEW YORK/BUENOS AIRES, May 30 (Reuters) - Argentina's first major bond sale in seven years, a $1 billion offering with payments in pesos, is a clear sign that global investors are regaining their faith in a country recently mired in triple-digit inflation. But the nearly 30% yield, higher than many expected, showed a high level of apprehension remains. President Javier Milei needs to prove to Argentines voting in October, the International Monetary Fund and foreign investors that the economic recovery will continue. Annual inflation has fallen to near 50% from over 270% a year ago. He has convinced the IMF to lend Argentina $20 billion and slashed government spending without losing much popularity, even though nearly 40% of Argentines live below the poverty line. Argentina owes around $300 billion, about $60 billion of which is in dollar-denominated international bonds. A return to dollar-denominated financing in global capital markets is embedded in the IMF program and is sorely needed to cement the recent recovery. This week's offering is "an important milestone on the path to refinancing future dollar commitments," said economist Gustavo Ber, head of Buenos Aires-based Estudio Ber. BTG Pactual called it a "savvy move" with the same outcome as the central bank buying dollars with pesos, without distorting the foreign currency market. The government said late on Wednesday that demand for the 5-year notes was about 1.7 times the $1 billion cap. The 29.5% yield exceeded initial expectations for about 25% and investors have the option to sell back the bonds after two years. Markets on Thursday signaled partial support, when prices for Argentina's dollar bonds issued under foreign or local laws rose marginally. Auctions like this could be replicated but other steps are crucial, said Armando Armenta, senior economist at AllianceBernstein. "It would be better to see more foreign direct inflows and, more importantly, the central bank purchasing reserves to meet the net international reserve accumulation targets," Armenta said. "This would open the door for Argentina to access the dollar sovereign debt market early next year." On Thursday, peso-denominated debt prices fell and the 10-year local note yield rose, roughly to 27% from 26%. "These rates in pesos are very high, considering their expectations of inflation falling towards 10% in the next two years," said Clyde Wardle, senior emerging markets FX strategist at HSBC, of the yield paid this week. If the current 47% inflation keeps falling sharply, those rates will turn out to be very high and raise the risk of pushing the government to print pesos to pay bondholders, he said. The new offering's yield was well above the expectations of local brokerage Puente, which noted that it "does not indicate strong conviction regarding the future evolution and sustainability of the (currency exchange)." The peso has fallen about 9% to the dollar since capital controls were loosened in mid-April. Argentina has promised the IMF to add $4.4 billion to its net reserves by mid-June. Those reserves were in the red in December and analysts doubt the June objective will be met. The new bond shows investor limits for now, HSBC's Wardle said. "It is unlikely Argentina could find an affordable dollar-denominated issuance rate that attracts foreign investor interest. There is still too much uncertainty about growth."
Yahoo
03-04-2025
- Business
- Yahoo
Brazil may emerge as winner from sweeping US tariffs, economists say
By Marcela Ayres BRASILIA (Reuters) - Sweeping U.S. tariffs could prove relatively advantageous for Brazil, Latin America's largest economy, despite President Donald Trump's move to impose a 10% levy on its exports to the United States, economists said on Thursday. Local markets reacted positively to the highly anticipated announcement on Wednesday, with the Brazilian real strengthening past 5.60 per U.S. dollar and reaching its highest level since October 2024. Meanwhile, the benchmark stock index edged up 0.23%, with many pointing out that Brazil's comparatively lighter tariff burden could shield it from major trade risks while also attracting capital flows shifting away from the United States. XP's research team said Trump's tariff policy is "bad in the absolute, potentially net positive for Brazil," as a trade war could bring gains for the commodity powerhouse while also accelerating Chinese investments in infrastructure across the country and Latin America more broadly. "During 2018-2020, amidst the China trade war, Chinese demand for commodities shifted from the U.S. to Brazil, benefiting products like soybeans and corn," said XP. Iana Ferrao, partner and economist at BTG Pactual, said the tariff imposed on Brazil came as a relief to those fearing steeper penalties. "As tariffs on other countries increased more sharply, certain Brazilian sectors could gain a relative competitive edge," she said. Luis Stuhlberger, chief investment officer at Verde Asset Management, said Brazil's balanced trade relationship with Washington meant it had "highly benefited" under the worldwide tariff package. "The question is whether Brazil will be able to seize this opportunity," he added. Government officials from Brazil - the world's largest exporter of soy, cotton, beef, and chicken - had sought to stress that its trade relationship with the United States did not undermine the U.S. economy. The U.S. has run a trade surplus with Brazil since 2008, reaching $253 million last year on more than $80 billion in bilateral trade.
Reuters
03-04-2025
- Business
- Reuters
Brazil may emerge as winner from sweeping US tariffs, economists say
BRASILIA, April 3 (Reuters) - Sweeping U.S. tariffs could prove relatively advantageous for Brazil, Latin America's largest economy, despite President Donald Trump's move to impose a 10% levy on its exports to the United States, economists said on Thursday. Local markets reacted positively to the highly anticipated announcement on Wednesday, with the Brazilian real strengthening past 5.60 per U.S. dollar and reaching its highest level since October 2024. Meanwhile, the benchmark stock index edged up 0.23%, with many pointing out that Brazil's comparatively lighter tariff burden could shield it from major trade risks while also attracting capital flows shifting away from the United States. XP's research team said Trump's tariff policy is "bad in the absolute, potentially net positive for Brazil," as a trade war could bring gains for the commodity powerhouse while also accelerating Chinese investments in infrastructure across the country and Latin America more broadly. "During 2018-2020, amidst the China trade war, Chinese demand for commodities shifted from the U.S. to Brazil, benefiting products like soybeans and corn," said XP. Iana Ferrao, partner and economist at BTG Pactual, said the tariff imposed on Brazil came as a relief to those fearing steeper penalties. "As tariffs on other countries increased more sharply, certain Brazilian sectors could gain a relative competitive edge," she said. Luis Stuhlberger, chief investment officer at Verde Asset Management, said Brazil's balanced trade relationship with Washington meant it had "highly benefited" under the worldwide tariff package. "The question is whether Brazil will be able to seize this opportunity," he added. Government officials from Brazil - the world's largest exporter of soy, cotton, beef, and chicken - had sought to stress that its trade relationship with the United States did not undermine the U.S. economy. The U.S. has run a trade surplus with Brazil since 2008, reaching $253 million last year on more than $80 billion in bilateral trade.
Reuters
26-02-2025
- Business
- Reuters
Brazil will take no exceptional measures to boost economic growth, official says
SAO PAULO, Feb 26 (Reuters) - Brazilian President Luiz Inacio Lula da Silva's chief of staff said on Wednesday that the government will take no exceptional measure to boost economic growth, and reaffirmed its commitment to the country's fiscal framework. Rui Costa told an event hosted by investment bank BTG Pactual that any measure needed for the government to meet the fiscal rules would be taken. He also voiced optimism about the Brazilian currency.
Yahoo
25-02-2025
- Business
- Yahoo
Brazil Finance Chief Says Lula Ordered Him to Fix Budget
(Bloomberg) -- Brazil's finance chief said he has received the mission to balance public accounts directly from President Luiz Inacio Lula da Silva, whom many investors see as unwilling to make the painful spending cuts that goal demands. Trump Targets $128 Billion California High-Speed Rail Project Trump Asserts Power Over NYC, Proclaims 'Long Live the King' NYC's Congestion Pricing Pulls In $48.6 Million in First Month NYC to Shut Migrant Center in Former Hotel as Crisis Eases As Visitors Discover Ghent, the City Is Trying to Prevent a Tourism Takeover 'The command I receive from the president is to tidy up and balance public accounts without harming the poor,' Finance Minister Fernando Haddad said at an event hosted by BTG Pactual in Sao Paulo on Tuesday. 'Brazil, without economic growth, will not be able to balance public accounts.' Investors have expressed mounting skepticism about Lula's commitment to shoring up public finances since late last year, when a much-anticipated package of spending cuts disappointed traders looking for signs that the government would move to curb Brazil's ballooning budget deficits and growing public debt. The leftist leader's declining approval ratings have generated added concerns that he will turn to populist measures to boost his popularity. Lula has announced measures to increase access to credit and bolster social programs in recent weeks. Brazil's real fell as much as 0.7% against the dollar on Tuesday morning before trimming losses, underperforming peers in Latin America. 'Lula's push to better publicize the administration's agenda is likely to add headline risks ahead of the election year, and lingering concerns over the government's populist agenda likely have weighed on the fiscal concerns,' said Dan Pan, economist at Standard Chartered Bank. Haddad's team set a goal of eliminating Brazil's primary fiscal deficit, excluding interest payments, in 2025, with a tolerance range of plus or minus 0.25% of gross domestic product. --With assistance from Raphael Almeida Dos Santos. (Adds Haddad comments, market move and additional context from second paragraph.) Walmart Wants to Be Something for Everyone in a Divided America Meet Seven of America's Top Personal Finance Influencers Why Private Equity Is Eyeing Your Nest Egg Trump's SALT Tax Promise Hinges on an Obscure Loophole Can Dr. Phil's Streaming Makeover Find an Audience in the MAGA Era? ©2025 Bloomberg L.P. Sign in to access your portfolio
