Commodity pricing, FX and EMTA’s ARS Industry Survey Rate Reviewed at Sixth Annual Buenos Aires Forum
Commodity pricing, the ARP FX rate and the continued publication of EMTA’s ARS Industry Survey Rate were among the topics discussed at EMTA’s Annual Forum in Buenos Aires. Puente sponsored the event, which took place on Tuesday, May 21, 2013, at the Hotel Emperador. 100 market participants attended.
Daniel Marx of Quantum Finanzas, who had last spoken at an EMTA event in 2000 when serving as Argentina’s Secretary of Finance, returned to moderate the Forum panel discussion. Marx prompted a discussion of commodity pricing, and its effects on the Argentine economy. HSBC’s Javier Finkman observed that his firm remains bullish on China, and thus on commodity demand. However, he cautioned that Latin exporters that had gotten used to rising commodity prices must lower their expectations and accept that no further increases were likely. On a political level, Finkman pointed out that many social programs in Argentina had been funded by commodities.
Andres Ronchietto of Galileo led a discussion of recent issues from Latin frontier markets, while acknowledging his firm’s preference for high-yield, rather than investment-grade, credits. “The market has acknowledged Paraguay’s good behavior,” he stated in reviewing the success of the country’s $500 million Eurobond. Ronchietto forecast 10% Paraguayan GDP growth, with 1.5% inflation.
The panel reviewed Argentine local and external debt, as well as provincial bonds. Pablo Santiago of Banco Mariva recommended Argentine-law bonds (such as the Bonar ’13), citing factors such as pre-election payment dates, their inclusion in the government budget (indicating an official intention to service the bonds), and their exemption from US court decisions. For Puente’s Juan Jose Ciro, provincial bonds represented attractive investment vehicles; he advised investors to consider Province of Buenos Aires ’15 bonds (which mature before half-term elections), as well as City of Buenos Aires ’18 and ’19 bonds (for those who prefer to avoid volatility). Additional provincial bonds (e.g. those of Neuyoquen) could interest those willing to accept low liquidity levels.
Panelists concurred that a major ARP devaluation, or change in exchange rate regime, was unlikely before elections. Finkman speculated that the official rate could reach 6 – 6.10 by year end, while concluding that the results of recent actions to “whitewash” black market currency was as of yet unclear.
Marx referred to the recent EMTA announcement that the Association would be transferring the ARS Industry Service Rate to another provider, and invited EMTA Senior Counsel Leslie Payton-Jacobs to provide additional commentary. Payton-Jacobs reviewed the development of the rate, confirmed EMTA’s intention to continue to work on producing the rate on a “more robust platform,” and stressed that the decision should not be confused as a reaction to “a potential split in FX rates.”
The timing and scope of a US court decision on Argentina’s defaulted sovereign bonds was difficult to predict, panelists agreed, with most speakers indicating they did not expect a favorable decision for the Republic. (Moderator Marx himself confessed to being “a bit more positive than consensus”). Finkman advised attendees “not to rule out any possibility,” including a request for an emergency stay of any final decision, etc. Santiago, Ciro and Finkman foresaw Argentine attempts to delay implementation of a decision, as well as re-routed payments. For Ronchietto, it remained unclear whether bondholders would move to accelerate bonds should Argentina not be able to service its debt.
EMTA conducted its annual survey of Argentine economic variables at the event. Click Here for the results.
EMTA FORUM IN BUENOS AIRES
Tuesday, May 21, 2013
Hosted by Puente
Hotel Emperador
Av. del Libertador 420
Buenos Aires, Argentina
This event will cover the global economic outlook, growth prospects for Argentina, and the investment opportunities in Latin America.
3:30 p.m. Registration
4:00 p.m. Panel Discussion
Opportunities in the Emerging Markets
Daniel Marx (Quantum Finanzas) – Moderator
Pablo J. Santiago (Banco Mariva)
Andres Ronchietto (Galileo Argentina SGFCI)
Javier Finkman (HSBC Global Research)
Juan Jose Ciro (Puente)
5:00 p.m. Cocktail Reception