So Much For The Sanctity Of Institutions

[glasgowjohn]

Not sure of the law here but bankers in the Uk have been charged in the past with illegally fixing FX prices and rates. This case stinks and it will be interesting to see who has benefiited from these trades. I hope the Central Bank publishes names in black and white.
It would be great if the govt could hold out and postpone the devaluation until March. But that is unlikely.

 

[sesamosinsal]

Untangling the mess that Cristina left is not easy and will require the help of everyone. As you said, it didn't really matter who won, this problem was still there. What did I see reported something like 15 billion dollars that the government has obligations to cover due to Vanoli et al trying to make things look stable instead of trying to actually fix things? No matter who was coming into the presidency, Argentina could not have upheld the futures that Vanoli sold, as far as i can tell.

And how does one continue to maintain a fictitious price without enough money in the reserves anyway? How long could they keep wearing no clothes until there are even more serious problems?

At the very least, what I see is Macri talking to everyone and trying to negotiate a way out of this mess instead of a few people in an inner, closed circle telling everyone how it's going to be. They were trades made in bad faith with an unsupportable price - which, BTE, just about everyone had to know who was involved in trading at those prices. He doesn't seem to be dictating this to anyone, but rather is trying to figure out the best way to get out of a bad situation left over from unspeakably horrible fiscal management at best and sheer arrogance and corruption of the truth more likely.

To summarize, Macri should get a get-out-of-jail-free card because it's the previous administration's fault. Such kirchnerite logic.

 

[scotttswan]

But Macri promised to restore the credibility of Argentina's institutions and bring back legal security.

I thought we were leaving this behind with Presidente Macri... I had such high hopes.

Prices in the onshore market currently suggest the peso will trade at 9.9 per dollar in the next three months, compared with 16 pesos per dollar in the offshore market. The black-market peso trades at 15.7 pesos per dollar compared with the official rate of 9.5.
Bank of America Corp. currency strategist Ezequiel Aguirre recommends buying future dollar contracts onshore and selling them offshore to gain the difference between the two.

The new resolution makes Rofex contracts more expensive,“but since the difference between offshore contracts and Rofex is so high, the trade is very attractive even after this change,”

While the central bank does not publish data on futures contracts it has sold, they may total as much as $10 billion, according to consulting firm Elypsis

http://www.bloomberg...-record-trading

[background=initial]Critics say that by setting artificial prices on futures contracts, the central bank is essentially subsidizing the price of dollars and that this could cost the next administration billions, just as it faces a cash crunch.[/background]
[background=initial]“I think it helped reduce pressure on the exchange rate, but it did so at an extraordinary cost to the country,” said former Economy Minister José Luis Machinea. “This is scandalous.”[/background]

[background=initial]His comments come after allies of Mr. Macri filed a criminal complaint against Mr. Vanoli and his board of directors for allegedly violating the bank’s charter by selling dollar futures contracts at below-market rates “to benefit third parties and causing grave damage to the bank’s assets.”[/background]
Federal Judge Claudio Bonadio ordered Tuesday’s raid as part of the investigation into the complaint. Experts say raids to secure evidence are standard procedure for Argentine judges after criminal complaints are filed.
[background=initial]The dispute arose after the trading volume of dollar futures rose sharply in late October, when investors jumped at the opportunity to profit from buying futures for just 10.6 pesos per dollar, when the market rate abroad was closer to 15 pesos.[/background]

http://www.wsj.com/articles/argentine-police-raid-central-bank-in-probe-of-alleged-trades-in-future-dollars-1447810886

Until it is known who bought these dollar futures, the legality of those sales and what relations the buyers have with the former government it is quite right to halt them and possibly make them null and void in the future.

Buying Dollar futures at a low price and selling them at a much higher price abroad for profit and at a huge cost to the country is criminal.

 

[dennisr]

Legally, no.

Certainly is guilty: manipulated the local market. Vanoli failed to fulfill his "fiduciary duty" to protect the assets of the Republic of Argentina. Hang the SOB.

 

[glasgowjohn]

Certainly is guilty: manipulated the local market. Vanoli failed to fulfill his "fiduciary duty" to protect the assets of the Republic of Argentina. Hang the SOB.

Hanging is not sufficient. Send him to live with CFK in Patagonia...

 

[AmigoArtistico]

I don't think it is criminal. It was a dirty play, but not criminal.

What he did was criminal. And by association, the board of directors. Vanoli is now facing possible prosecution. I know that this is Argentina, but they still had to have a solid basis for bringing charges.

The law clearly states that the Central Bank can sell currency futures. But it must be at the highest market price. Not the highest market price in Rosario, or in Argentina, but at the highest market price, which was, at the time, and by an enormous margin, the futures price in the US.

That being said, I was shocked at the solution being proposed by the new government. I really don't see how this idea of theirs is going to help instill confidence in Argentina as a place to do business.

I absolutely agree with you that the only reasonable, logical solution is to delay the lifting of the cepo until the end of March, when the majority of these contracts expire. If they don't, they're probably going to lose in court anyway, and be forced to pay them.

 

[AmigoArtistico]

...At least the Kirchners negotiated with ... 93 percent of bondholders...

If what you mean by "negotiated with" is Kirchner saying, "We'll give you 30% on the dollar, take it or leave it," then I suppose you could say that he "negotiated" with them.

 

[AmigoArtistico]

"Breaking a trade", happens all the time. The trade is corrupted. Welcome to the real world. End of story.

That's a nice idea, but proving it in court, at least for the majority of these trades, will prove difficult or impossible. Even though Vanoli acted illegally, that is not in itself a legal reason to void those contracts. To do that, they will have to prove fraud, which in the vast majority of cases probably did not exist. Taking advantage of the government's stupidity doesn't constitute fraud.

 

[AmigoArtistico]

But Macri promised to restore the credibility of Argentina's institutions and bring back legal security.

I thought we were leaving this behind with Presidente Macri... I had such high hopes.

Don't give up yet. Let's hope they come to their senses, or at least arrive at a reasonable, palatable solution.

 

[sesamosinsal]

The law clearly states that the Central Bank can sell currency futures. But it must be at the highest market price. Not the highest market price in Rosario, or in Argentina, but at the highest market price, which was, at the time, and by an enormous margin, the futures price in the US.

Can you cite the law? I doubt the law says that the BCRA would have to respect market rates set in other countries for futures contracts sold on local exchanges (ROFEX and MAE) under Argentine law. In fact, if you try to buy and sell currencies (or futures contracts) outside of a country, the rates are always less advantageous.

A Central Bank is a monopoly, and the central bank is the only institution in Argentina that is legally authorized to set the value of the Argentine peso.
http://infoleg.mecon.gov.ar/infolegInternet/anexos/25000-29999/28133/texact.htm
(I disagree 100% with such power, but that is the way it is.)