Talks to restructure more than $65 billion in foreign debt seemed to have hit a wall as one of the main groups of bondholders is now evaluating his option to seek repayment in the courts. Officials and creditors failed to find common ground after 2 bondholder groups submitted an offer before the latest deadline. Argentina has set a deadline of June 19 on its latest proposal after extending it 4 times, but the deadline doesn’t have tangible impact since the country fell into default on May 22 after missing overdue interest payments of $500 million (please refer to previous posts).

As tensions mount, the government is considering all possible options, among them asking the International Monetary Fund for a new programme sooner than previously planned or using payments tied to agriculture exports. Farmers are lobbying against Economy Minister’s Martín Guzmán proposal as “A measure like this would mean export taxes couldn’t be scrapped until the bond matures”.

The farm industry is key for tax revenues and to bring in dollars: Argentina’s crop exports were valued at $23.7 billion last year.

President Fernández hiked export taxes already 6 months ago when he took office. More recently, the central bank has taken steps to prompt farmers to sell their soy harvests. Dual foreign-exchange rates are also driving concerns about input prices which are becoming very expensive, and we previously talked about Vicentin expropriation. Ultimately, authorities are trying to manage farm products exports and to get their dollars. What comes next…and for now, the new deadline has been set for July 24.

Situation/weather: The farm is slowly recovering after the torrential rains registered earlier in February. The water is very slow to evacuate as the problem was emphasised by the illegal internal protection walls build by some farmers upper the river which affected and changed water course. By end of June, we will start with the support of local authorities to clean and drain the river El Dorado as well as to build some protective dyke around the perimeter, approved by the water regulation authority.

Cattle operation (2,900 heads): The gauchos have transferred the cattle of flooded sections to dry area close to the corral in order to prevent sanitary issues (hoof disease, tick) and cattle losses (weight loss, injury, etc). Transfer of Cattle video

Particular attention was paid to the move of baby calves to avoid losses are they are the most sensitive category given their morphology. Soon, we will also perform with the assistance of our vet team, pregnancy test of cows which were earlier in service.

We are also in the process of delivering 240 calves that we sold as opportunities arise for the strong domestic market and export. After America’s meat-processing woes opened up a window for importers, Argentina shipped 1,290 metric tons to the United States in April. A year ago, US importers bought only 2 tons. April is the same month that outbreaks of Covid-19 among US meatpacking workers triggered a wave of shutdowns that tightened local supply and sent prices rocketing. Argentine beef exports had already begun to pick up under President Mauricio Macri, who left office in December. Macri negotiated access to the US market, which re-opened to Argentina in late 2018, ending a ban that began in 2001 after an outbreak of foot-and-mouth disease.

Even under President Alberto Fernández, who prefers intervention over Macri’s free-market approach, Argentine beef export boom seems set to continue. Uruguay also benefited from shortages in the US.

President Alberto Fernández announced on June 8 in the evening that the government will intervene and expropriate bankrupt agricultural giant Vicentin. The President said the move to save the bankrupt agro-export giant was predominantly motivated by a wish to save jobs: “We are going to come to the rescue of Vicentín and defend its 2,600 workers,” and added “Around 2,600 local producers can still count on a company that will be able to trade their production.”

The government will take control of Vicentin for the next 60 days as it seeks congressional approval to expropriate the agricultural powerhouse, which filed for bankruptcy last year after being caught out in currency swings. Vicentin’s fate has been closely tied to politics. The company expanded under the presidency of market-friendly Mauricio Macri and then fell into disarray when Fernandez emerged as his likely replacement.

Vicentin is a family company with 90 years in the business, which started facing severe financial issues in 2019.The company defaulted on about $1.5 billion of debt last year. A court in Santa Fe province, where the company is headquartered, has been overseeing a bankruptcy in a procedure that’s similar to Chapter 11 in the U.S. A big part of Vicentin’s debt is owed to state-run Banco Nacion. But the expropriation plan was still a surprise to company executives, who’ve been in talks with existing partner Glencore Plc and other companies, a spokesman said. Switzerland-based Glencore has a joint venture with Vicentin called Renova, which includes one of the world’s biggest soy-crushing plants with 20,000 mt of daily crushing capacity. However, Fernandez said it was too soon to say how a new state partnership with Glencore would work.Gabriel Delgado, who was an agriculture secretary under Kirchner, will lead the government’s intervention of Vicentin. Assets will be placed in a trust to be managed by the agriculture department of state-run YPF SA.

This surprised announcement raises again another question: Who exactly is governing Argentina? Fernandez, who’s far from a free-marketeer but viewed as a moderate, or his deputy, Kirchner, a figurehead for fervent supporters of Latin American leftism and nationalism.

The move comes at a delicate time for Argentina, which is negotiating a restructuring of $65 billion in overseas debt. It also revives memories of the 2012 nationalization of YPF and other companies during the presidency of Kirchner, and raises questions about how Argentina will lure private-sector investments to lift its economy off the floor.It s also worth to remind that Mrs Kirchner never forgot the Argentine farmers strike in 2008 over levies on exports which almost forced her to resign, and also recalls that many farmers (those who could) would prefer to hold on to their crops, until they could have access to a more transparent foreign exchange market for the US dollar. To be followed …

For the 3^rd time, the government has extended its deadline to restructure more than $65 billion in a bid to seal a deal with its creditors. The news was confirmed by the Economy Ministry Martín Guzmán on June 1^st, which hinted Argentina will sweeten its offer to creditors one more time in a bid to seal a deal before the new shut-off point of June 12. The government said it would announce results by June 15 or “as soon as possible thereafter.”

In parallel, lockdown in Buenos Aires and its surroundings could last until late July/early of August as virus peak is near, according to City government official.

While the Government has extended quarantine for 15 more days until June 7 amid rise in infections, Argentina fell into its ninth default on May 22 after failing to make its $500 million interest payments due.

Government and creditors continue negotiating, as Economy Ministry Martín Guzmán extends deadline for talks until June 2 to reach a deal. Argentina is looking to restructure $65 billion in international debt (please refer to previous posts of April and May 2020).

While bondholders now have the option to take Argentina to court to sue for full repayment, creditors said last week that legal action against the country would be counterproductive. Argentina’s bonds have risen in recent weeks to trade between 30 and 40 cents on the dollar, reflecting increased optimism that a deal will be reached. However, there is still a gap of about 20 cents on the dollar between what the government was offering and what creditors want.

The government remains flexible on the specifics of the deal as the country already faced its third year of recession and without a deal, Argentina would suffer even more of the full effect of default. The arrival of the coronavirus pandemic is just the cherry on the cake that Argentina needed. To be continued …

The lockdown has been extended until May 24, with adjustments depending on the region. The strictest limits are applied in the capital and the province of Buenos Aires, which concentrates most cases of COVID-19 (86%). Outside of this area, the country is gradually reopening (smaller cities like Corrientes could already return to almost normal activities).

That said, loggings of timber at Tata Cua forest are on schedule. End of March, we sold 615 m³ of wood to be cut (pines and eucalyptus) to a wood processor. So far, 50% of the planned cuts have been completed. Almost all pines area sold was cut down and delivered while eucalyptus cuts will restart. 2 additional months are expected to complete full wood-cuttings.

On May 11, Argentina announced the extension of negotiations over its $65 billion debt restructuring proposal until May 22 to “increase participation”. The extension sets the stage for tense last-ditch talks as Argentina races to avoid default.

The new deadline (previous passed without the support needed for a comprehensive deal), means the offer will expire the same day Argentina could trigger default over a  $500 million interest payment. Please refer to previous post of April 2020.

Argentina is racing to revamp unsustainable debts amid a strong recession, high inflation, and increasingly expensive borrowing costs as concerns over a potential ninth sovereign default have rattled investors and hit bond prices.The talks so far have not been easy with 3 major creditor groups rejecting the initial proposal and pushing for improved terms. Argentine officials have said the country cannot afford to pay more but they are open to counterproposals. To be continued…

Situation/weather: While Government extends lockdown for cities with a population over 500 000 people until May 10^th to contain virus, smaller cities like Corrientes may return to normal activities if they meet 5 requirements. This will help the recovery of the local economy but without real impact for us as farming activities were mandatory excluded from quarantine. Farm operations are running as normal and we took preventing organization measures to prevent the sprayed of the virus and run the risk that the entire farm personal may be put in isolation if someone from the staff may be affected when they return to their families. So far, no cases have been declared among our staff in any of our farms.

As for the weather, the farm starts “to look a bit dry” as we registered a warm and dry month of April (with temperature exceeded 30°C) and few rains were registered since the beginning of the year (-18% compared to historical rainfall). No water stress has to be reported so far but we would appreciate some rains to boost pastures.

Cattle operation (6,042 heads):  The cattle is in good shape. We are testing pregnancy of heifers previously inseminated. We are also selling 360 male calves. Then, we are entering in a stabilization phase and we will focus on the maximisation of the pregnancy ratio of breeding heifers. We have reached around 3,000 breeding cows and heifers by retaining until now young female calves to increase and replace mothers’ herd.

Silage and pasture program: We are in process of sowing 158 has with OAT and 118 has of Ray grass. Both grasses have a high protein content to feed cattle and support high loads of animals per hectare. OAT is also cleaning the soil and improving its structure.

In addition, we are also buying 245 tons of corn and 170 tons of pellets and mixed supplementation to cover food needs for the winter. Those pellets have in particular a higher nutrition density, higher economic benefits (animals can digest, absorb and conserve better) and are easier to store/transport than traditional silage.

On April 20, Argentina’s biggest bondholders have rejected the proposal laid out by the government late last week to restructure $83 billion of foreign debt, raising the prospect that the country could enter into default as early as next month.

Argentina has chosen to make a unilateral offer which would have reduce debt payments by $41.5 billion and give the country time to pull out of a recession that is only expected to get worse as a result of the Covid-19 pandemic, according to Argentine Economy Minister Martín Guzmán.

The proposal calls for a 3 year grace period on capital and interest payments, a 62% discount in interest payments and a 5.4% reduction in capital payments, which combined would provide $41.5 billion in debt relief. If accepted, bondholders would swap 21 outstanding bonds for new notes that mature in 2030, 2036 and 2047. The new bonds, denominated in US dollars and Euros, will pay between 0.5% and 4.875% per year, for an average rate of 2.33% that will start to accrue on 15/11/22. No payments of principal or interest will be made until 2023.

However, creditors denounce this restructuring plan as unacceptable. Even if Mr Guzmán said this was the final offer, room for negotiations with the creditors should be found. It is better for Argentina to reach a deal with the bondholders than to default.

Short term, Argentina needs to pay around $500 million in interest payments on bonds included in the restructuring on April 22. If it misses the payment, it will have a 30-day grace period before triggering a default around May 22. To be continued…

Situation/weather: The farm is still partially under water after the torrential rains registered earlier in February. The water is very slow to evacuate as the problem is emphasised by the illegal internal protection walls build by some farmers upper the river which affected and changed water course (a legal action is ongoing and cleaning plans have already been approved by local authorities). Rains have still been registered there since.

Some facilities and houses are still under water as well as some full access to sections of the farm. For now, we must wait the water has evacuated.

Cattle operation (2,660 heads): The gauchos have regrouped the cattle of flooded sections to transfer them to dry areas in order to prevent sanitary issues (hoof disease, tick, etc) and cattle losses (shrinking, weight loss, injury, etc). Mothers and young calves are the most sensitive categories and need food supplementations given their morphology.

To avoid supplementation cost and to reduce temporally the density per hectare of animals, we are selling 120 Male calves.