Argentina is in talks with China ahead of a potential default on its bond obligations. While this is said to be a surprise to some investors, it should not come as a surprise to ValueWalk readers. Investors who purchased SWAPs insurance would do well to make sure their SWAPs default contracts are iron clad and ISDA compliant.
Argentina playing the new cold war game to perfection
Argentine President Cristina Kirchner, playing the new cold war game to perfection, has been busy lining up trade deals, investments and credit lines from Russia and China to help bridge the country’s financial needs should any fallout from a potential default turn negative, the New York Post is reporting.
Kirchner boasted about her new international buddies on Twitter over the weekend. Kirchner, 61, tweeted a picture of herself with China’s president Xi Jinping along with the text “My purpose in this visit are to promote development and to enhance mutual cooperation.” The Post says Argentina is close to signing an $11 billion currency swap deal with China to support the Argentine peso and provide a boost to various trade deals.
Argentina likely to ignore U.S. court ruling
As early as May 8, ValueWalk had reported Argentina was likely to ignore US court rulings and default on its bond obligations. ValueWalk was later the first US news outlet to report on legal advice given to Argentina that told them to ignore the US Supreme court and default. On June 18 ValueWalk was reporting that Argentina was defaulting as planned. This past July 7 and more specifically on July 14, ValueWalk reported said a default is likely.
Emboldening Argentina is a budding movement primarily orchestrated by China and Russia to usurp US world dominance on the financial stage. In a July 15 article, ValueWalk reported on the development of a BRICs world bank to compete with the IMF and western-dominated economic system.
Establishment of an alternative finance system
In that article July 15 we reported that establishing a competing world bank would be the first step in creating a financial system that is not dependent on the west. Establishment of an alternative finance system would enable countries such as Argentina to avoid US demands that it completely pay its previous bond holders, as the primary threat of being “shut out of the world financial system” is no longer as significant a concern. The move to establish a new banking system could draw a collection of additional nations around the world who would then have the ability to chose not to play in the US and Western European controlled sandbox.
The New York Post is reporting that investing sources familiar with the litigation “did not see (the default) coming.” Separate ValueWalk sources unrelated to Elliott management have indicated the hedge fund is aware of the risk and took out credit default SWAP insurance against just such an instance occurring.