It’s hard to cry for Argentina

There are many deserving cases for debt forgiveness amid the global coronavirus pandemic. The Group of 20 has offered to freeze repayments on debt owed to governments by the 70-plus poorest nations and has invited private creditors to join. It is less clear that Argentina, an upper middle-income country that is a net creditor to the rest of the world, is equally deserving.

The South American nation has run up $323bn of debt, much of it during the previous administration of Mauricio Macri. Investors gambled on his vision of a new Argentina that had learnt from eight previous defaults. Those who bought a 100-year bond offering a 7.9% yield at the peak of Macri-mania have only themselves to blame. The IMF joined in too, hastily approving the biggest bailout in its history after market confidence in Macri began to wobble in 2018. The fund handed over most of its promised $57bn before Macri left office, leaving a heavy repayment schedule for his successor, the Peronist Alberto Fernández.

Now economy minister Martín Guzmán says the country is in effect bankrupt. He argues that Argentina cannot offer private bondholders anything for the next three years. After that, the holders of $65bn of foreign-law debt can expect only an average coupon of 2.3%, plus a modest haircut in the value of the principal. If agreement cannot be reached by May 22, a default will be triggered.

Argentina is missing a compelling economic narrative that would persuade its citizens to repatriate and invest the $300bn they are estimated to hold abroad. Instead, the central bank is printing money, threatening runaway inflation in a country where confidence in the national currency is close to zero. Tariff freezes, exchange controls, export and wealth taxes complete an unhappy picture.

All the debt forgiveness in the world will not save Argentina if Guzmán cannot attract the private investment needed to get the country growing. /London, May 6

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