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Argentina Sees Trade Balance Pick Up

James Boston
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www.finances.com
Argentina Sees Trade Balance Pick Up

Despite the perilous nature of Argentina’s emerging economy Trade Balance figures today confirm that at least this aspect of the economy is performing. The reading for the month of June shows a positive balance of $1,379M compared to $1,259M in May, the consensus estimate was for a level of $491.5M.

Argentina is just days away from debt default. The country has until the end of July to make good on a $1.5Bn payment to US hedge funds that are holding defaulted Argentine bonds, according to a recent court ruling this payment must take precedence over current obligations, one of which is a payment that was due on 30th June relating to 2033 government bonds. If Argentina does not resolve this situation within the 30 day grace period then debt default is the only option. A more probable outcome however is that Argentina reaches a deal with either it’s creditors or the court, either of which would enable payment under the current bond obligation.

2014 is generally proving to be a difficult year for South America’s third largest economy. Baring a dramatic pick up, GDP growth is likely to come in negative for the year, this is a far cry from the near double digit readings in recent years and will be the first time that Argentina has recorded an annual contraction since it defaulted on $100Bn of bonds in 2001. It is this bond default that is proving the biggest stumbling block to stability within the Argentine economy, many holders of this defaulted debt are holding out for full repayment and they are receiving some positive rulings in the courts. Although negotiations are ongoing to attempt to reach a settlement on this outstanding debt, the lack of certainty is proving to be a significant contingent liability which is warding off potential investment into the Argentine economy.

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