DON'T CRY FOR THE BOND MARKET

              

  ARGENTINA BONDS

With much fanfare and financial press commentary, Argentina has returned to the International Bond Markets.

·         It raised $17 billion mixture of 3/510and 30year bonds at a yield of 7.5%
·         Orders were $70 billion, 4 times over subscribed
·         It is largest one-day issuance by a developing nation in history
·         Argentina has a dreadful track record as a borrower
·         It has defaulted on government debt nine times since independence.
·         In 1890,global credit markets panicked when Barings almost collapsed due 

      to a hefty Argentine default.
·         It was rescued by arch enemies Rothschild for the second time that century;Not so lucky in 1995 when it collapsed and was bought by the Dutch bank ING       

 In 2001, unemployment in Argentina reached more than 20%, causing riots,looting and political instability

       

·         The country saw five presidents in two weeks,

·         It  defaulted on ≥ $100 billion in debt – the world’s largest ever sovereign default

·         It even defaulted on $10 billion of debt to the IMF, a problem not resolved until 2006 

·         By the end of the crisis the country’s economy had shrunk by a fifth

• In 2001,U.S.hedge funds -“the vultures”  bought deeply discounted bonds and blocked  restructuring by the Kirchner[Peronist]governments   
•         
• This despite the fact that the other 93% of bondholders had agreed a severe restructuring  and had begun to be repaid

• The newly elected Mauricio Macri government has now settled with all past bond holders; allowing for Argentinas spectacular return to the credit market
•  Argentina raised enough to pay back existing creditors and still have some left over

                                                                       

                

•  Macri have been given the red carpet treatment by global leaders and the bond markets
•   Maybe this time the nation won’t default.

This week’s news gives me an excuse to write of my affection for this benighted,abundant, mismanaged, infuriating country ,its people and Futbol .I have been Argie-phile since childhood. Readers of this blog may have picked up a few clues.The reasons are peculiar to my family.

   

Der Oncle-Der Yiddisher Arbeiter Bund

As a little boy I heard tales of the Argentine “oncle’. My father’s uncle was his only surviving relative. He had been his favourite uncle in “der heim”-Poland before WWII. The story goes that he, like my father subsequently, had been a member of the Jewish Workers Party. Formed in the late 1880’s to protect Jews from the Tzar and to promote International Socialism. Der Yiddisher Arbeiter Bund was a major political movement in the revolutionary era from the 1880s until the Jewish genocide of WW II. His uncle had been a body guard to the leadership at meetings and rallies.

  

My dad told me his mother’s brother had “escaped” to Buenos Aires in the 1920's after a rally had been violently attacked by the authorities. A policeman had been killed and “der Oncle” left for Argentina. Presumably he did not have enough cash for the man at the US consulate.

I must have been about 9 years old when I heard this story for the first time. I was sworn to secrecy in case my dad could be deported by association .It never occurred to me to ask: to where, by whom and for what—it was several years before I became an obnoxious inquisitor. I was not to speak of the Oncle’s past with my mum or my two sisters; they were 6 and 2 at the time and already revolutionary enough. Needless to say I never met my uncle when I was a child, nor do I recall knowing his first name –he was “der Oncle Kukiolka”.

   We finally met when I was twenty seven. His wife and he came to my sister’s wedding in London. They were in their eighties , the first time out of Argentina  since he immigrated  50 years  earlier .They were undertaking  a world tour to see relatives “before we die”, the Auntie had a cousin in Canada, there was a rediscovered cousin in Germany and there was Leon’s daughter’s wedding to attend in London. The uncle was in his eighties; about four feet eight inches tall and the same wide. This was a body guard for the Bund? Why not, his nephew, my dad, had had a similar role and he only grew to five feet five. Young, uneducated, idealistic,angry boys of the Jewish Proletariat; they could not write political tracts or make powerful speeches but they could try to protect those who did. Awful times.

   

    Anyway, the couple was the guests of honour and stayed with my parents. They spoke no English and my parents no Spanish. The Yiddish flowed, many tears and remembrances.My own indelible memory is of a family dinner before the nuptials .My father kept nagging the bride to be, a fluent Spanish speaker, to “speak to the Oncle in Spanish”. Finally she told dad that she could not understand a word his uncle said “Dad he speaks a weirder Spanish with a stronger accent than you speak English" The nagging stopped. 

    

    Thus began a fondness for Argentina. England had provided one old bodyguard with a refuge and Argentina another to his Oncle .The body guards survived, had families and grand children. Henryk Ehrlich, Victor Alter and other Bundist leaders escaped the Nazis to seek refuge in the Soviet Union. They were shot or sent to the gulag. Rootless Cosmopolitans no doubt. No soft spot for NKVD/KGB for me. Sorry Jeremy.        

     

Abandoned Opus

     The next sections of this opus were to be about Argentine culture;political history; and dysfunctional populist economics.Finally about my first trip in 1990 and my experience doing business there --an oil deal for the IFC[World Bank] in 1991 which is still on the books and paying dividends; and on the board of a small bank between 1993-99 I think.By that time the Oncle and auntie had died but I did meet distant cousin Boris and his family.We went with his young son to a Boca Juniors game.I was going to duck a commentary on the Malvinas[British diplomat that I am] but not on the Generals Dirty War or the "Disappeared".

Any readers still with me will be relieved that all this has now been abandoned. A treatise on the Argentine -English football rivalry will be in a future blog. 

    I will finish today with the following  

Key things to know about The Argentine Self Image

 An ethnic survey of Argentines 45 million people revealed that 60% believed they were Spanish, 60% Italian, 35% other European and the rest Jews, Arabs or Welsh. Most also believed that the population was 4^th in the International Maths Rankings. They all despised the government.

It is well known that other Latin Americans believe Argentines are arrogant and narcissistic. Argentines proudly accept this and believe the rest of the region is envious.

 The country is dominated by Buenos Aires,supported by an extraordinarily abundant and productive agricultural sector .

Portenos, those living in Buenos Aires, have a unique self image. They say about themselves : that they are Italians, who speak Spanish, live like the French and wish they were English.When not dancing the Tango,they are watching futbol,romancing  and eating Parilla- Barbecue .  

                                                   

One begins to guess that Portenos arrogance,fine living and love of style may be  a protective veneer against the desperate state of Argentine politics,history and generations long mismanagement of the economy.                                                                                                                                                                       

                                                            

                                                   

 .                                                                 

Oops sorry wrong cartoon --but Argentines would recognise this style of political leadership.

One of the richest nations on earth at the turn of the 20th century.The enormous potential of its sophisticated population and abundant resource base wasted by a succession of populist,Peronist  governments  interspersed with fascistic military Juntas.

Perhaps no coincidence,Argentina has more psychologists per capita than any other nation.WHO estimates it has 145 per 100,000 residents far more than second place Denmark, with 85,or ninth place US with 31. Many analysts in Buenos Aires, cluster in the neighborhood Villa Freud. 

 It is estimated that almost half of Portenos have had Freudian analysis. There is no estimate of the percentage that benefitted. Psychoanalysis is a very important part of the culture, almost as significant as Futbol. In 2008 the newsweekly,Noticias asked a panel of 10 psychoanalysts to explain why ex-president Néstor Kirchner was stealing the policy making spotlight from his wife, President Cristina Kirchner. Another asked: What to make of Mrs. Kirchner's statement that her husband sleeps in the fetal position.

Much of the above has been researched so that I can justify writing the following joke.

How does an Argentine commit suicide? 

By climbing his own ego and jumping !