Argentina: The bond extortion
President Cristina Fernandez de Kirchner wants tax evaders hiding about $160 billion in dollars to help finance Argentina’s oil-producing ambitions. Her offer: Buy a 4 percent bond or face the prospect of jail time.
The tax authority announced the plan May 7, highlighting its information-sharing agreements with 40 nations and warning Argentines who don’t use the three-month amnesty window that they risk fines or arrest. Evaders have two options for their cash and the only one paying interest will be a dollar bond due in 2016 to finance YPF SA (YPF), the state oil company. The 4 percent rate is a third the average 13.85 yield on Argentine debt and less than the 4.6 percent in emerging markets.
I’m sure investors will rush to purchase bonds with below-market yields from a government who’s fined economists who dared publish data on Argentina’s real inflation rate of 25%, while
The government’s statistics agency reported Wednesday that annual inflation last month amounted to 10.5%.
That’s been roughly the rate around which the government has been paying on its inflation-linked bonds.
If investors in those securities have accepted the reduced payments based on the official data, workers unions in recent years have not, successfully garnering annual wage increases of 25% or more.
But, hey, the government’s increasing the monitoring of income and spending.
What could possibly go wrong?
Linked by Dustbury. Thank you!