From September 1 2019:
Headline: Argentina: how IMF’s biggest ever bailout crumbled under Macri
Sub-headline: With the Peronists waiting in the wings, the country is struggling to avoid a ninth sovereign default
‘The decision to seek what became the biggest bailout in the IMF’s history took only a few minutes.
A loss of faith in Argentina’s reform programme had been visibly demonstrated by a two-week run on the peso in spring last year. President Mauricio Macri had few options left. A long-mooted contingency plan went into action.
“When it came to it, we had discussed it so much, for Macri it was no problem,” says one senior government official recalling the events of last May. “The decision took five minutes . . . back then, Macri was fine and he was very happy with the agreement . . . after all, we had managed to get $50bn.”
Headline: Argentina wrestles with creditors over repayments as default looms
Sub-headline:Buenos Aires to delay coupons until 2023, which one bondholder calls a’non- starter’
Some of the world’s largest institutional investors are locked in a stand-off with Argentina over terms put forward by the government to restructure $65bn of foreign debt, as the cash-strapped country heads towards its ninth sovereign debt default.
On Wednesday, Buenos Aires skipped about $500m in scheduled payments on three foreign bonds, triggering a 30-day countdown to a formal default. The country’s proposal to reduce its huge debt burden landed with a thud last week, eliciting immediate objections from three groups that represent a large chunk of bondholders.
Asset managers BlackRock, Fidelity, Ashmore and T Rowe Price, which have joined forces with AllianceBernstein, Wellington Management and other institutional investors, criticised the government’s proposal to delay any debt payments until 2023, arguing that it places a “disproportionate share of Argentina’s longer-term adjustment efforts on the shoulders of international bondholders”.
From April 4, 2020:
Headline: Argentina bondholders snub ‘disproportionate’ debt offer
Sub-headline: Biggest creditors attack government’s proposal to restructure $65bn of foreign debt
Argentina’s biggest bondholders have doubled down on their opposition to the government’s plan to restructure its $65bn foreign debt mountain, all but confirming the failure of the deal, which expires on Friday.
On Monday, three groups representing some of the country’s largest private creditors issued a joint statement confirming they would not support the proposal from Buenos Aires, which calls for interest payments to be delayed until 2023 and principal payments until 2026.
Tensions have run high between Argentina and its creditors since the proposal was announced last month. The three groups, which represent some of the world’s largest institutional investors including BlackRock and Fidelity, have already rejected the offer independently, with some calling it “unacceptable” and not a product of “good faith” negotiations.
“Each of the three bondholder groups and the institutions they represent, together with various other investors, wish to reiterate and make clear that they cannot support Argentina’s recently launched exchange offer, and will not tender their bonds in such offer, because, among other reasons, they consider the terms to require Argentine bondholders to bear disproportionate losses that are neither justified nor necessary,” the creditors said in a statement on Monday.
From April 28 2020:
Headline: The Argentina Debt Reduction Proposal by Jayati Ghosh
A Template to Prevent a Global Debt Crisis?
s the United Nations warns that the “Great Lockdown” threatens to become the “Great Meltdown”, it’s now clear that most sovereign debt of developing countries is simply unpayable. Even before the Covid-19 pandemic, total public and private debt in developing countries was nearly double their GDP. External short-term debt is a real problem: as much as $1.62 trillion is due to be repaid by developing countries this year, with another $1.08 trillion due in 2021.
This would have been a struggle before; now, the Covid-19 crisis makes it impossible. Developing countries are being battered by a tsunami of falling export and tourism revenues and dramatic outflows of capital, causing sharp currency depreciation. Without quick and substantial action, many governments will be forced into debt defaults.
So does the international community (assuming that there is still one) want a perfect storm of disorderly defaults that could wreck the global financial system? Or a more equitable distribution of costs among lenders and borrowers, with less damage to people? The UN has argued for a new “Global Debt Deal” for developing countries, involving a $1 trillion debt write-off, recognizing that this is one of those unusual moments in history when the fate of the international system hangs in the balance.
Fortunately, there is a concrete example of how this could be done. The new government in Argentina has proposed a set of principles and a framework for debt sustainability that make eminent sense. If adopted by creditors, it would set the stage for a manageable debt reduction in Argentina that would enable the country to grow its way out of the currently unsustainable debt. It would also provide a template for dealing with other unsustainable developing country debt.
Jayati Ghosh’s essay was re-posted at Naked Capitalism by the indispensable Yves Smith!
Consider this from the Financial Times of October 21, 2019:
Headline: Will Argentina be safe in the Peronists’ hands?
Sub-headline: Leftwing populists are poised to retake power. The priority is a swift renegotiation of the country’s huge debt pile
The victor of this Sunday’s election in Argentina will inherit one of the world’s most unenviable economic messes.
Inflation is running at 55 per cent a year, the economy is in a deep recession, poverty is rising, billions of dollars have fled the country, the peso has plunged and Argentina is unable to pay its $100bn foreign debt. It sounds an all too familiar story in a country that aspired to European levels of prosperity in the early 20th century but has consistently disappointed ever since.
This time was supposed to be different: Mauricio Macri, scion of one of the country’s wealthiest families, came to power four years ago promising that his market-friendly policies and business savvy would finally put the Argentine economy right.
But after a series of blunders that led to another IMF bailout last year, Mr Macri has achieved what few thought possible, according to a senior executive at an international bank in Buenos Aires: he will hand over Argentina’s economy in a worse state than it was when he inherited it in 2015 from Cristina Fernández de Kirchner, a leftwinger criticised by international investors for her repeated bouts of state intervention.
Somewhat improbably against the dire economic backdrop, Mr Macri is running for a second term. But few even in his own team expect him to win. A national primary on August 11, widely regarded as a good barometer of sentiment, was won handsomely by the main opposition candidate, the centre-left Peronist Alberto Fernández, whose running mate is Ms Fernández de Kirchner.
Thinking about the questions raised by the Argentine ‘default’ – calling it vexing is understatement, yet in the Age of The Pandemic, the whole of the World System/Capitalism is facing imminent collapse.
The Technocratic tinkering to mitigate Financial Capital’s excesses, and the Southern Tier’s economic fecklessness: to borrow from the scalding, under the claims of the Virtuous Northern Tier’s defamation of the Greeks- the only real question is what is to be done? With the utter failure of the Technocrats where do ‘we’ turn?