Argentina's Formosa Province Defaults on $1.1 Million Paymentgreenspun.com : LUSENET : Grassroots Information Coordination Center (GICC) : One Thread
Top News Fri, 3 Aug 2001, 10:27am EST
Argentina's Formosa Province Defaults on $1.1 Million Payment
Buenos Aires, Aug. 2 (Bloomberg) -- Formosa, a province in northern Argentina on the border with Paraguay, defaulted on $1.1 million of principal and interest due on three bonds, saying it didn't receive its share of federal tax revenue in time.
The region missed Aug. 1 payments totaling $978,491 on a floating rate dollar bond due in 2010 and $125,810 on dollar- and peso-denominated bonds due in 2007, the Buenos Aires Stock Exchange said. The bonds were sold on the domestic market.
Investors say Argentina's provincial governments, with a combined $23 billion of debt, often are late on bond payments, and Formosa was late on at least one this year. Once home to thriving cotton and forestry industries, Formosa is now among Argentina's poorest, relying on federal money for 95 percent of its budget. Defaults in the provinces could undermine investor confidence in the federal government's ability to cover $130 billion of debt. ``Right now the government's great struggle is to try to ensure the finances of the provinces,'' said Jaime Benedit, an analyst at Marcuard Asset Management. ``It's not good for anyone if provinces enter into default. It would be chaos.''
Formosa pledged to make the payments ``as soon as possible,'' according to a letter it sent to the exchange.
The region said it missed the payments ``because of the unjustified delay of the federal tax transfers the necessary funds.''
Last month, Formosa, located about 1,100 miles north of Buenos Aires, was among several provinces in Argentina that asked banks for a six- month reprieve on loan payments due this year because a recession has reduced tax revenue.
Formosa spends about 60 percent of its $652 million budget on salaries, making it the biggest employer in the province and an economic lifeline for its 500,000 residents.
I predict a lot of U.S. states are going to have there own budget problems as they're spending was raised during the bubble and now tax revenues are going to decrease dramatically and of course the states will try to maintain those spending levels anyway but without any success as the states will have to layoff as well. Magically the unemployment level remained at 4.5% today as the US Government becomes more desparate to prevent the stock market from declining any further by fiddling with the numbers.
-- Guy Daley (firstname.lastname@example.org), August 03, 2001