Argentina Clears Path for Debt Settlement on the Back of President Obama’s Visit
Argentina’s new government cleared a major hurdle that signals its credibility to the financial world: the Senate yesterday voted, by an overwhelming majority of 54 to 16, in favour of overturning a law that prohibited settlement of debt with a specific group of bondholders – the “holdout” bondholders. This is significant on two fronts: firstly, the vote by the Senate removes the final impediment to settling the debt issue that led Argentina into default, resulting in isolation from the international financial markets that has starved the country of capital needed to drive economic growth. Argentina, after being a pariah nation for 14 years, can now fulfill its role as a true member of the G20 group of nations. Secondly, the vote shows strong support from the Argentine people for the economic policies that President Macri’s government has put in place in its first 100 days. The vote eases concerns that had previously been expressed about the extent of buy-in from a legislature in which the President’s party does not control a majority.
The Argentine Senate vote comes on the back of President Obama’s state visit to Argentina last week. Speaking of the renewal of the bilateral relationship between the USA and Argentina, President Obama said: “Under President Macri, Argentina is reassuming its traditional leadership role in the region and around the world.” President Obama also gave the assurance that, “The United States stands ready to work with Argentina through this historic transition in any way that we can.”
Business-orientated discussion with the US delegation centred on the reintegration of Argentina into the world’s financial system. To that end, the USA has already ended a policy, introduced in 2011, that blocked multilateral development banks from lending to Argentina. This policy change was made as a result of Argentina’s new government’s “progress on key issues and positive economic trajectory,” stated the US Treasury. With the dropping of US opposition, Argentina is expected to secure a US$3.5 billion loan to be drawn down in tranches from the World Bank between 2016 and 2018, and a second loan of US$5 billion is likely to be forthcoming from the Inter-American Development Bank.
Another key area of discussion was energy investment: Many US oil majors are already investing heavily in Argentina’s giant Vaca Muerta shale play – the world’s third largest shale gas resource and its 4th largest shale oil resource. An extensive list of US companies already committed to the Vaca Muerta includes Chevron, Exxon Mobil and Dow Chemical.
In terms of nuclear, President Macri is one of the keynote speakers, along with Japanese and New Zealand Prime Ministers Abe and Key respectively, at the Nuclear Security Summit being held in Washington today and tomorrow. The USA has stated its interest in supporting the candidature of Argentina’s Rafael Grossi to the International Atomic Energy Agency. Improving bilateral relations in nuclear energy come in the wake of Argentine nuclear engineering firm, INVAP, which built Australia’s only nuclear reactor, completing the design of the USA’s first medical isotope facility for Coqui Pharma. Molybednum-99 is used in approximately 20 million medical diagnostic procedures per year in the USA, and is facing a major disruption as 40% of the world’s supply will be taken offline when Canada’s Chalk River facility is closed in 2018. The Molybdenum-99 – producing reactor is to be built on land provided by the University of Florida.
There was intense interest from the US delegation in Argentina’s renewable energy potential since it has the world’s best solar resource in the Atacama Desert in the high Andes, which it shares with Chile and Bolivia. In addition, the Patagonian region in Argentina and Chile has enviable wind resources in an area of good infrastructure. In recognition of this potential, the new government has set aggressive targets for renewables to contribute 8% of the country’s electricity needs by the end of next year, from only 1% at present, increasing to 20% (10 gigawatts (“GW”)) by 2025. “Ten gigawatts in ten years is an ambitious target” said the business manager at General Electric. Nevertheless, General Electric has committed to delivering at least 1.5GW before next summer. In addition, Dow Chemical has announced that it will invest US$123 million in the construction of a 65 megawatt wind farm in Argentina’s Rio Negro province.
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Argentina’s commitment to low-carbon energy is supported by the decision, after careful review of associated contracts, for the construction of two hydroelectric dams in southern Argentina. These two projects would generate 4% of the country’s electricity requirement.
President Obama used the occasion of the 40th anniversary of a military coup that led to widespread repression and the disappearance of an estimated thirty thousand Argentineans, to apologize for the USA’s apparent support of the military government of that time. He undertook to declassify military, intelligence and enforcement records relating to that period. President Obama’s apology and the Senate’s decision to clear the way for settlement with the US-based holdout bondholders, should go a long way toward re-establishing trust and constructive bilateral relations between the USA and Argentina.
Sources: Businesswire, Clarin, El Ambito, Enernews, Infonews, La Nacion, Mining Press, New York Times, Perfil, Reuters & World Nuclear News.
- March 31, 2016 – Triunfo oficialista: el Senado aprobó por amplia mayoría el pago a los holdouts
- March 29, 2016 – Cumbre Nuclear en EE.UU: viaje de Macri y cita con Xi
- March 28, 2016 – Empresas USA apuestan por Argentina. Los planes de Genneia. Kind: se viene la regulacion
- March 28, 2016 – Why Obama apologized to Argentina, and why he was right to
- March 25, 2016 – Chihuido: Punto por punto: que dejo Obama a la Argentina?
- March 23, 2016 – Obama declares a new partnership after talks with Argentine leader
- March 23, 2016 – Antes de la llegada de Obama, Dow anuncia la creación de un parque eólico
- March 23, 2016 – Obama visit affirms Argentina’s shift toward center
- March 22, 2016 – Chihuido: Gutierrez negocia con la Nacion. El futuro de las represas K y el GNEA: frenan Atucha III?
- March 21, 2016 – Obama en Argentina: Renovables y cooperacion nuclear, los ejes
- March 17, 2016 – Obama to unseal files on Argentina’s “Dirty War”
- March 06, 2016 – Energias renovables y cooperacion nuclear, ejes de la relación bilateral
- April 09, 2015 – Coqui Pharma completes design of medical isotope facility
- January 14, 2015 – CoquiRadioPharmaceuticals finalizes agreement with University of Florida Foundation for land transfer to construct medical isotope facility in Alachua County
- January 21, 2016 – U.S. end opposition to multilateral development bank loans to Argentina
- Nuclear Industry Summit 2016
- February 23, 2016 – El “efecto Obama” llegan dos misiones comerciales
Richard Spencer is president and CEO of U3O8 Corp., (UWE.TO, OTC:UWEFF and SSE:UWE). U3O8 Corp. (www.u3o8corp.com) is a Toronto-based exploration company with a portfolio of ... <Read more about Richard Spencer>