Effects Of A Default On Expats

[rickulivi]

La Coqueta

If you want something to worry about, which I am sure you don't, focus on the cepo to the dollar. That's a very dangerous situation because it's a reflection of a lack of dollars in the country and some huge subsidies that, at some point, will not be affordable. What will happen then? Lots of potential social trouble.

For example, last week I took the following trains, each for a 45 minute or so ride: Sarmiento, San Martin and Urquiza. These railroads had two things in common: they pack you like sardines, and each was free. I took several round trips and paid nothing. Nada. At some point, because of the cepo, the government will not be able to offer free rides. Imagine what will happen then?

Keep an eye on the cepo. That's were the trouble is brewing.

 

[GS_Dirtboy]

La Coqueta

If you want something to worry about, which I am sure you don't, focus on the cepo to the dollar. That's a very dangerous situation because it's a reflection of a lack of dollars in the country and some huge subsidies that, at some point, will not be affordable. What will happen then? Lots of potential social trouble.

For example, last week I took the following trains, each for a 45 minute or so ride: Sarmiento, San Martin and Urquiza. These railroads had two things in common: they pack you like sardines, and each was free. I took several round trips and paid nothing. Nada. At some point, because of the cepo, the government will not be able to offer free rides. Imagine what will happen then?

Keep an eye on the cepo. That's were the trouble is brewing.

This!

 

[ajoknoblauch]

La Coqueta

To answer your question, from my perspective, a default will have no major negative impact on Argentina. To the contrary, it may work out very well because after the dust settles, there will be a new swap and no chance of any vultures left. Life will become more normal than now, with far less uncertainty.

No impact because the Argentina government hardly borrows in the international markets now; there is little credit for regular people and so a default won't change things. The key will be the speed with which a new swap is proposed and accepted. The new offer should eliminate the damming RUFO clause, so it will remove future uncertainty.

In sum, no catastrophe because of a default, and quite possibly, lots of benefits. We all understand that a potential default now is not being caused by the inability to pay the existing bondholders that accepted the swap, but rather being forced by a few "vultures" who don't want to accept the conditions that others were forced to accept. Thus, a new default will even things out.

Finally, don't forget that Cristina and her husband were early vultures too, so she understand the game very well. How do you think they amassed their earlier fortune when they bought bank owned homes?

I hope my message brings peace of mind to you!

While I may not feel so certain as you do about the possibilities - I never underestimate Argentina's capacity for self-created disaster - this is a thoughtful non-polemical analysis.

 

[ArielFabian]

中国 means China, and the rest means.. *!%$#=!!!^*! .... Just wondering if the Argentinean officers who signed the agreements were equipped enough to prevent from clauses that can lead to unfavorable situations again, as happened with the RUFO clause before, or have an idea of the Chinese culture, economy, ideology, etc.

This has been a way to solve immediate issues with the vulture funds but can lead to something worse than the current situation in the future.

View attachment 1yuan2.bmp

 

[Don Alberto]

...
No impact because the Argentina government hardly borrows in the international markets now; there is little credit for regular people and so a default won't change things. ...

Try: "because the Argentina government cannot borrow in the international markets".

The Argentine provinces yearn to borrow in the international markets, BsAs alone 2.5 billion US$, Mendoza 800 million US$, etc. The republic needs a huge investment to develop Vaca Muerta, but it cannot borrow in the international markets and a default won't help.

Casi 40% de hogares cree que sus ingresos no alcanzan. The private credit: sales have to a high degree been based on 3 - 6 - 12 quotas sin interes, even the daily food bought in supermarkets. Lose your job and owe half your previous annual income.

 

[rickulivi]

Don Alberto:

Very respectfully, I suggest you do not mix things. You wrote that "the republic needs a huge investment . . ." The statement, I believe, is incorrect. YPF, not the republic, may need to borrow. It can pledge the future income stream as collateral, so they should have little problem borrowing.

As for the provinces yearning to borrow, now that's a bad idea. They should learn to live within their means, so if a default reduces their ability to borrow, that's actually very good news. Fiscal responsibility is what's needed.

 

[ajoknoblauch]

Don Alberto:

Very respectfully, I suggest you do not mix things. You wrote that "the republic needs a huge investment . . ." The statement, I believe, is incorrect. YPF, not the republic, may need to borrow. It can pledge the future income stream as collateral, so they should have little problem borrowing.

As for the provinces yearning to borrow, now that's a bad idea. They should learn to live within their means, so if a default reduces their ability to borrow, that's actually very good news. Fiscal responsibility is what's needed.

I tend to agree with you about provincial borrowing but, in the absence of genuine federal revenue-sharing, it could result in greater dire poverty and increased movement to villas in Buenos Aires and other cities.

 

[Joe]

Don Alberto:

Very respectfully, I suggest you do not mix things. You wrote that "the republic needs a huge investment . . ." The statement, I believe, is incorrect. YPF, not the republic, may need to borrow. It can pledge the future income stream as collateral, so they should have little problem borrowing.

As for the provinces yearning to borrow, now that's a bad idea. They should learn to live within their means, so if a default reduces their ability to borrow, that's actually very good news. Fiscal responsibility is what's needed.

Exactly. Anything that reduces the ability of the politicians to spend (i.e. steal and line the pockets of their cronies) is a good thing.

 

[ajoknoblauch]

Exactly. Anything that reduces the ability of the politicians to spend (i.e. steal and line the pockets of their cronies) is a good thing.

Government spending is not always bad. Government spending in Argentina almost always is.

 

[Rich One]

Provinces borrowing for current expenses such as salaries is bad.!