EMTA Forum in Buenos Aires - April 16

EMTA FORUM IN BUENOS AIRES
Thursday, April 16, 2015 

Hosted by 

4:45 p.m. Panel Discussion 

Alejo Costa (Puente) – Moderator
Daniel Canel (AdCap)
Gabriel Arguissain (Consultatio)
Gustavo Canonero (Deutsche Bank)
Lionel Modi (Orígenes)

5:45 p.m. Cocktail Reception 

Complimentary for EMTA Members / US$695 for Non-Members. 

We regret that this event is not open to the press.  

Argentine Elections the Focus of EMTA Forum in Buenos Aires

EMTA’s Annual Forum in Buenos Aires took place on Thursday, April 16, 2015, with over 200 market participants in attendance.  Puente hosted the event, which was held in Spanish with simultaneous translation into English.

Alejo Costa (Puente) moderated the discussion.  During the panel, Costa raised both global and Argentina-specific topics for his speakers to address.

Deutsche Bank’s Gustavo Canonero suggested that 2015 would be a less interesting year for Argentina, but would foreshadow more important changes in 2016, when a new presidential administration takes office.  US rate hike policy would obviously be the main global economic driver, he said, and the sustainability of US growth remained an important issue to be determined.  Canonero expected US rates to be raised by 250 bps in the upcoming tightening cycle, but revealed he was more concerned about the effects of a stronger US dollar than worried about US rate hike spillover.  He forecast world economic growth at 3.4% in 2016, with Europe and LatAm among the laggards.

Daniel Canel (Ad Cap) believed that the US FOMC itself remained confused about when rate hikes should commence, although he brushed off major concerns about ramifications; “the market will be able to absorb it,” and he “would not be surprised” if the UST 10-year still yielded below 2% in December.  Canel did, however, warn attendees about possible developments in Greece, with its upcoming debt payments and public statements from its anti-austerity government.  Canel also stressed that investors should be up to date on developments in neighboring Brazil.  Gabriel Arguissain (Consultatio) noted that, when the US finally raises rates, it would still occur in the context of great global liquidity.

The upcoming Argentine presidential election was discussed at length.  In Canel’s view, there was a risk that, if the opposition wins, changes might be too fast; if Peronists remained in power, changes could be very gradual.  In any case, it would be premature to forecast what the new policies would be.  Canonero surmised that all politicians, wanting to be re-elected, would be inclined to act quickly, so they can blame any changes as necessary corrections to an “inherited problem.”  Speakers largely agreed with Lionel Modi (Origenes) that the economic status quo would continue until October.

There was unanimity that resolving the hold-out issue should be its top priority for the incoming government, although it would also have to address inflation, fiscal policy, FX controls and labor issues, including a bloated public sector.  Canonero believed that a strong mandate would greatly assist a new president in explaining changes in economic policies, and reducing social tensions.
Arguissain was unsure whether Argentine society might be ready for a shock solution, rather than a gradual approach.  “If shock therapy means people will be poorer, taking away subsidies will not be popular.”  He argued that depreciation of the ARP should be part of a comprehensive program to restore growth and exit the “quasi-closed” economy that has resulted from Argentina’s post-default isolation.

Other topics included the potential of a voluntary swap of Boden ’15 bonds, the continued legal proceedings against the Republic in New York courts, the main risks to investing in Argentine bonds, and how asset prices would react to a victory by each candidate.