Virus poses perfect storm scenario for Argentine debt

IN THE MIDST of a delicate debt restructuring, Argentina is holding its breath as the coronavirus pandemic coupled with an oil price slump poses a perfect storm for its economy.

The omens are not encouraging for the leftist administration of President Alberto Fernandez, who has been battling global economic headwinds since taking office three months ago.

“The economy fell last year, surely this year it will fall too and I don’t know, with all this international conflict, if it won’t deepen the crisis,” Fernandez said in an interview with Argentine radio last week.

“The world is conspiring to make our exit (from the crisis) more difficult.”

Argentina has stumbled through a two-year recession with GDP down 2.1% in 2019, after a 2.5% fall the previous year.

The International Monetary Fund forecasts a further contraction of 1.3% in 2020.

In addition to rising poverty and unemployment, Buenos Aires is also grappling with inflation which soared to nearly 54 percent in 2019.

And the turmoil on the markets this week has roiled the government’s restructuring deal with creditors.

Economy Minister Martin Guzman has met investors to try to finalize the restructuring of $69 billion of the country’s massive public debt before a March 31 deadline.

The US-trained economist is also hoping to delay the maturity of some institutional loans.

Argentina currently owes $311 billion -- more than 90% of the country’s GDP -- with more than $30 billion in repayments due before the end of March.

The overall debt includes $44 billion outstanding from a deeply unpopular $57 billion IMF bailout negotiated by Fernandez’s center-right predecessor Mauricio Macri in 2018.

A default would block the grain exporter’s access to global markets.

Setting the tone for tough negotiations with bondholders, Fernandez last month insisted the country will not be able to pay off its creditors if its recession-hit economy fails to resume growth.

He ruled out imposing austerity measures to help pay debt while poverty remains at record levels.

“The government wants to avoid a default but is also confident it can reach an agreement on its own terms” with bondholders, said market analyst Daniel Kerner of Eurasia.