Effects Of A Default On Expats

[Matiasba]

How come all these threads turn into 'The Matiasba Show' ?
I'd like some opinions to the question I posted as an example of what the OP asked to begin with. "...impact us in our daily lives..."

please, show me one single thtread where I participated and turned into a show.

 

[gpop]

gpop: every case is different, so it's hard to find a general answer. Often, a debt comes with a devaluation (and I'd expect this in the case of Argentina independently of a default). In case of a devaluation, it favors those who have either other currencies or real objects like apartments/houses and is disadvantageous to those having savings in pesos. Now given your actual example: if you'd take a credit in pesos and didn't buy the car before the devaluation, you'll be screwed. If you bought the car, it theoretically should favor you (as a devaluation effectively reduces your debt), however I'm not sure which clauses a local credit contract have in such a case.

THANK YOU!
See, this is how to answer the question. This is an example of a daily-life situation.
The theories being argued are pointless if you can't give an example of what it all means.

 

[gpop]

please, show me one single thtread where I participated and turned into a show.

oh please... look at it yourself. If there is any topic that is even remotely political in nature you're all over it.

 

[AmigoArtistico]

There won´t be a default. Actual debt levels are low. Argentina will not be forced to pay, it will negotiate its way out. This has nothing to do with the current goverment. Argentina is getting backing from many important countries and sectors, because if they are made to pay something outragous this will put the entire financial system in "check mate" because renegotiating debt is a very common thing to do. The solution to this will be political. I wouldn´t worry about this.

I'm sorry, but most of what you said there is untrue.

• New sovereign debt agreements for some time now have changed in the way they settle disputes in default situations, so that the situation that Argentina finds itself in won't happen to others in the future (or at least not in this way).
• The solution to this will not be political. It's too late for politics in this case (despite what some might think reading the newspapers here). There has been a judgement from the New York courts, and the only way out is a successful negotiation between the parties or, failing that, a technical default. There is nothing in US law that permits some political intervention at this point, and the US has already clearly stated that it cannot and will not interfere in an ongoing judicial matter.

Argentina may well avoid a default, and based on the government's recent actions (settling the CIADI cases, with Repsol and with the Paris Club) -- and because of them -- one would think (and the markets certainly do) that they'll do something between now and July 31 to skirt disaster. But that solution will have nothing to do with politics and the world financial system.

 

[Jaredberryman]

I imagine they will make some kind of deal, deplete most of the reserves, and Argentina will continue to limp on with more 30 percent inflation until CFK finishes. I think we won't see daily repercussions until the next moron/government comes into power. When that happens, there will likely be a big devaluation, which will hurt, but not like in 2001. People will have less buying power and the inflation might actually get a bit worse than it is now. Some subsidies might be axed and so some daily things might get more expensive, but with salaries having less buying power due to inflation. But I don't think there will be some massive crash like in 2001 or a corralito. If planes de trabajo are a taken away, we could see massive protests form piqueteros, which does make life difficult. For those of us with dollar incomes, I think things will cost about what they cost now for us due to the fact that the subsidies will be gone but other things will be cheaper due to the devaluation.

Actually no one knows what will happen for sure, but I think the above things are the most logical prediction.

 

[French jurist]

I'm sorry, but most of what you said there is untrue.

• New sovereign debt agreements for some time now have changed in the way they settle disputes in default situations, so that the situation that Argentina finds itself in won't happen to others in the future (or at least not in this way).
• The solution to this will not be political. It's too late for politics in this case (despite what some might think reading the newspapers here). There has been a judgement from the New York courts, and the only way out is a successful negotiation between the parties or, failing that, a technical default. There is nothing in US law that permits some political intervention at this point, and the US has already clearly stated that it cannot and will not interfere in an ongoing judicial matter.

Argentina may well avoid a default, and based on the government's recent actions (settling the CIADI cases, with Repsol and with the Paris Club) -- and because of them -- one would think (and the markets certainly do) that they'll do something between now and July 31 to skirt disaster. But that solution will have nothing to do with politics and the world financial system.

Complex situation (there's no international Law of sovereign bankruptcies), the solution might actually be political, but not in the way like Obama overriding Griesa's decision (I did read something about that some weeks ago: when a judicial ruling affects substantially foreign policy, the President has such a power. If someone knows more about that?), since obviously BO won't wet his shirt now to defend directly Argentina (a bit too late indeed).
Solution might be political because Griesa's decision (and the fact the SC refused to look at the case) simply puts private interests (and not yours or mine, we are little fish) before the sovereignty of the states.
That's already a problem because if Griesa's ruling indeed applies to bonds under the NY law, it's hardly arguable that Europe is under the sovereignty of Griesa's Court (that's why the BONY is in an aweful situation).

To reverse things, I sincerely don't think that US investors buying bonds under the NY law would accept not getting paid because a Belgian court decided otherwise (or not?!). In fact, I think the situation would be very different and if the USS Nimitz was seized in Cameroon, US reactions would also be different.

I'll dare to pretend that Argentine's position is stronger than the Vulture funds ones (for political reasons).

 

[ajoknoblauch]

I imagine they will make some kind of deal, deplete most of the reserves, and Argentina will continue to limp on with more 30 percent inflation until CFK finishes. I think we won't see daily repercussions until the next moron/government comes into power. When that happens, there will likely be a big devaluation, which will hurt, but not like in 2001. People will have less buying power and the inflation might actually get a bit worse than it is now. Some subsidies might be axed and so some daily things might get more expensive, but with salaries having less buying power due to inflation. But I don't think there will be some massive crash like in 2001 or a corralito. If planes de trabajo are a taken away, we could see massive protests form piqueteros, which does make life difficult. For those of us with dollar incomes, I think things will cost about what they cost now for us due to the fact that the subsidies will be gone but other things will be cheaper due to the devaluation.

Actually no one knows what will happen for sure, but I think the above things are the most logical prediction.

That's a reasonable analysis, but this is not a reasonable country. You may underestimate Argentina's obstinacy.

 

[Rich One]

oh please... look at it yourself. If there is any topic that is even remotely political in nature you're all over it.

Matias has a mission in life "To defend the Model" , and he is entitled to have his opinion , he should be respected . It's absolutely pointless to argue these issues. Some may waste time believing he can be enlightened

 

[French jurist]

I imagine they will make some kind of deal, deplete most of the reserves

Or it could be that the US taxpayers end up paying the Vulture funds (indirectly, like what happened for Congo, thanks to GWB who took this decision in all independence) B)

Argentina cannot really deplete its reserve imho:
- if there's a risk the RUFO clause applies -> global default (creditors who accepted the restructuration lose what's left to be repaid + the Vulture funds get paid from the CDS).
- if there's no agreement before the end of the month -> the Vulture funds lose everything (because the CDS might not operate) and the other creditors get paid in a different way, end of the story.
- if there's an agreement before the end of the month, with the RUFO clause not applying -> creditors who accepted the restructuration keep getting paid, the Vulture funds lose what they invested in CDS but get a profit (lower than the 1.5 or 1.3 billions they claimed), partly in bonds, partly in cash.

 

[gpop]

Ok, so back to the topic at hand, "daily life". How does one plan ahead in the short and long-term?
Does one assume the worst and start buying up dollars at blue rates ASAP? Gold? Property? Anything of value just to avoid maintaining pesos even on a peso salary? It's obvious that the peso has not, and will not improve (as per the parabolic decline since 2001).
I'd like to invest what little I have; but with this, it seems more out of reach than ever before. Argentines tell me things like "This happened before, we ride it out and things will get back to normal". I don't know about this. Something feels different now.

Does something like BRICS latest movements even factor into the immediate and long-term for Argentine population?