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Rio’s Steel Giant, Argentina’s Debt Failure

Rio de Janeiro's new giant steel mill, Argentina's debt problems, top real estate investment picks in Latin America.

BY CHRONICLE STAFF

RIO'S STEEL GIANT

Rio is making history and we’re not talking about the 2016 Olympics. Last week, German steel giant ThyssenKrupp and Brazil-based Vale, the world’s largest iron ore producer, opened an $8.2 billion steel mill in Rio. The ThyssenKrupp CSA Siderúrgica do Atlântico represents the largest private investment undertaken in Brazil in the last 15 years. More than 30,000 workers constructed the mill, making it one of the largest mobilizations of manpower ever witnessed in the history of Brazil, Vale says. The 950,000 m3 of concrete used in the construction work would be sufficient to build twelve stadiums the size of the Maracanã in Rio, the largest soccer stadium in South America. Meanwhile, the 110,000 tons of metallic structures used are equivalent to 11 times the amount of material used in the Eiffel Tower in Paris. And the km2 area of land where the steel mill complex is located is equivalent to twice the area occupied by Ipanema and Leblon, two Rio de Janeiro neighborhoods.

The impact of the new mill? Since it will export its total annual output of five millions tons of steel slabs, it will boost
Brazil’s export of that metal by 40 percent and add $1 billion to the country’s exports. In addition to being a partner in the venture, Vale is responsible for supplying the iron ore to be used by the steel mill complex, through a 15-year contract signed with ThyssenKrupp. This is the longest contract ever signed by the mining company, it said.
 
ARGENTINA'S DEBT FAILURE

Argentina’s solution to resolving its debt default is inappropriate and unbecoming of a G20 member nation, say two experts.

“Instead of the Argentine government looking for a cooperative solution, they want a unilateral decision,” Claudio Loser and Arturo Porzecanski said last week at a teleconference. “The nation’s financial situation has greatly improved since the crisis of 2001-2002, yet Argentina is not doing itself any favors of public perception because until the default is cured they will attract minimal foreign direct investment and be barred from the US capital markets.”

Loser is a former head of the International Monetary Fund’s
Western Hemisphere division and currently a senior fellow at the Inter-American Dialogue and senior associate at Centennial Group. Porzecanski is a former veteran of ING and ABN Amro and current distinguished economist in residence at the American University in Washington, D.C.

Even if
Argentina’s Economy Minister Amado Boudou is able to achieve a 60 percent adhesion rate, they will still have a debt in arrears of an estimated $30 billion, they point out.  “The $30 billion alone still qualifies Argentina to hold the record of the second largest default only to their first,” they say. 

This includes $8 billion in obligations in arrears with an additional $10 billion of punitive interest, $7 billion owed to the Paris Club and about $4 billion or in litigation, totaling an estimated $29 billion. “This level of default, which will equal 8 percent of
Argentina’s GDP, itself constitutes one of the largest sovereign defaults and repudiations in the history of sovereign lending,” say Loser and Porzecanski.

REAL ESTATE INVESTMENTS

UK-based Global Property Guide has singled out Latin America for residential property investment this year. “Many Latin American countries are seeing the sort of institutional reforms that grew the mortgage markets in Eastern Europe, and raised valuations so much,” it says in a new report. “These reforms will encourage the growth of the mortgage markets, encouraging the mass purchase of housing.” The report singles out these countries as their top picks in the region: Peru, Panama, Brazil, and Chile.

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