Argentina to structure its debt with the IMF and bondholders

A source familiar with the matter said that Argentine President-elect Alberto Fernandez intends to negotiate with international creditors from private institutions and the International Monetary Fund, as part of a strategy aimed at reaching a better agreement to restructure Argentina’s debt.
The Bloomberg News Agency quoted the source as saying that the new government of the President-elect believes that holding simultaneous but separate talks with creditors may give Argentina greater negotiating power, along with the possibility of amending the proposals on the table. These negotiations are expected to start in the wake of Fernandez’s inauguration on December 10.
It is noteworthy that these talks come after the great financial crisis that struck Argentina last August and led to an increase in bond yields and a decrease in the value of the local currency, which led to an increase in the burden of debt service burdens.
The government of outgoing President Mauricio Macri said she would seek to extend the repayment period of $ 101 billion in debt, including record loan payments from the International Monetary Fund.
The President-elect had indicated that he did not want to announce that his country had stopped paying its debts, but that he could not pay them according to the current conditions.
Fernandez, who won the presidential election last October, had his first contact with the head of the International Monetary Fund, Kristalina Georgieva, and informed her of his plan to achieve economic growth and solve the debt problem, but he does not intend to impose further austerity measures On the people.
Both the International Monetary Fund and Argentina announced, last week, a “cordial” contact between the newly appointed director of the Fund, Cristina Gorgeva, and Argentine President-elect Alberto Fernandez, after a period of continuous attack by the latter on the international institution during his candidacy for the presidency.
Fernandez said the International Monetary Fund is willing to work with his country to control inflation. He added that Argentina could not carry out further austerity measures “because the situation is very complicated,” according to Bloomberg.
For her part, Gorjeva confirmed that she is very eager to know more details about Fernandez’s plan. She said in a statement to the Fund: «Today I made a very constructive contact with President-elect Fernandez. During the phone call, we talked about the Argentine economy and the president’s views on the main challenges facing the country. ” She continued: «I emphasized that the International Monetary Fund is ready to engage with the government, and work to pave the way for sustainable growth and poverty reduction. We agreed to continue the open dialogue in the interest of the Argentine people. ”
And in the middle of this month, the Bloomberg News Agency said: “The Argentine president is preparing to entrust the central bank in his country with trying to boost the economy, which is suffering from a severe crisis, through the application of a low exchange rate.”
Fernandez, who will take office officially on December 10, has promised voters that he will revive the economy after its slowdown, and he now aims to make the central bank the cornerstone of this strategy, by exploiting the fact that the bank is not legally independent of the government.
A low-value currency, according to theory, would help bridge the current account deficit that many economists consider the main cause of the recurring series of Argentina’s financial turmoil.
Projections indicate that the Argentine deficit will reach 1.8 percent of GDP this year, after reaching more than 6 percent in the third quarter of 2018.
A report by the British “Financial Times” pointed out earlier that Fernandez inherits an economy in a very bad situation, exacerbated by the continued capital flight dramatically following the widespread uncertainty during the last presidential elections.
And last year, outgoing president Mauricio Macri signed a former IMF managing director Christine Lagarde on a $ 57 billion bailout package, the largest in the fund’s history, with a number of austerity policies imposed, which many observers believe were themselves part of the reasons That led to the economic crisis in Argentina previously.
For her part, Georgieva inherits what some see as mistakes of the former fund manager, which has resulted in harming a number of countries that the fund has dealt with, especially Argentina … which means that the two new presidents; The reputation of both.
After Fernandez criticized the Fund’s policies during his election campaign, accusing it of causing a large part of his country’s economic crisis, he returned and promised to respect all the agreements concluded by his predecessor Macri, a measure that contributed greatly to calming the local markets and returning the balance to the Argentine currency.
Now, many experts and observers believe that the two parties will most likely work to reformulate the agreement between the two sides to try to balance the relationship and move forward to succeed in overcoming the “mistakes of the past”.

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Argentina

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