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Argentine President Cristina Fernandez with Cabinet Chief Jorge Capitanich (left) and Economy Minister Axel Kicillof (right). (Photo: Government of Argentina)
Wednesday, June 25, 2014
Trade Talk

Argentina Debt Chaos

Argentine debt chaos, FDI in Latin America, wealth growth slows down.

BY LATINVEX STAFF

When the US Supreme Court on June 16 declined to hear Argentina’s appeal over a lower court’s ruling on its foreign debt obligations, it clearly caught President Cristina Fernandez and her economic team by surprise. So much so, that in the following days it managed to change its response four times.

First, Fernandez told national TV that same day that she would not abide by New York U.S. District Judge U.S. District Judge Thomas Griesa’s original ruling that ordered Argentina to pay $1.3 billion to hold out debtors. The following day the government also announced that it would seek to move its overseas bonds into local jurisdiction to skirt the ruling.

However, on June 19 the government announced that it planned to start talks with holders of its defaulted bonds in a bid to comply with the U.S. court ruling.

But then -- later that same day -- Cabinet chief Jorge Capitanich said that there would be no Argentine mission going to New York for talks.

Then on June 20, President Cristina Fernandez said her government would negotiate with all of Argentina's creditors.

But on June 22, the government again sounded defiant as it placed advertisements in major newspapers demanding US courts help foster "fair and balanced" negotiations.

"They’re acting like a wounded animal in a corner," Jorge Mariscal, chief investment officer for emerging markets at UBS Wealth Management, told Bloomberg.


FDI: MEXICO JUMPS, BRAZIL FALLS

Mexico jumped five spots among the top destinations worldwide for foreign direct investments last year, while Brazil fell one spot, according to a Latinvex analysis of data from the United Nations Conference on Trade and Development (UNCTAD).

With FDI growing to $38 billion (up from $15 billion in 2012), Mexico now ranks as the 10th-largest FDI recipient worldwide, up from 15th in 2012.

Brazil ranks as the fifth-largest FDI recipient, down from fourth in 2012, after seeing FDI fall from $65 billion in 2012 to $64 billion last year.

Although Chile and Colombia saw increased FDI last year, they fell on the worldwide ranking due to higher growth in other countries. Chile now ranks 17th worldwide, down from 11th place in 2012. Meanwhile, Colombia shares a 19th place with Italy, down from 16th place in 2012.


Top FDI Recipients

2013 FDI in billions of US dollars

Rank

Country

FDI

1

US

188

2

China

124

3

Russia

79

4

Hong Kong, China

77

5

Brazil

64

5

Singapore

64

7

Canada

62

8

Australia

50

9

Spain

39

10

Mexico

38

11

UK

37

12

Ireland

36

13

Luxembourg

30

14

India

28

15

Germany

27

16

Netherlands

24

17

Chile

20

18

Indonesia

18

19

Italy

17

19

Colombia

17

Source: World Investment Report 2014, UNCTAD


WEALTH GROWTH SLOWS

Latin America saw the world’s slowest growth in High Net Worth Individuals (individuals with assets of $1 million or more), according to Capgemini’s World Wealth Report 2014.

“Latin America was again an exception to strong global HNWI growth, with increases of only four percent in population and two percent in wealth, due to slow GDP growth and challenged equity markets,” it said.

The region now has 542,200 HNWI individuals, with a total combined fortune of $7.7 trillion. Brazil accounts for 172,000 HNWI individuals, with a total combined fortune of $4.0 trillion, according to Capgemini.


© Copyright Latinvex


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