Argentina’s “sick” economy suffocates from the effects of “Corona”
The global slowdown may facilitate debt rescheduling tasks
Wednesday – Rajab 23, 1441 AH – March 18, 2020 AD number number [
Corona virus outbreak worsens pain in Argentine economy (APA)
Buenos Aires: «Middle East»
The sick Argentine economy essentially finds itself facing the consequences of the emerging Corona virus and the sharp drop in oil prices, while Buenos Aires has been negotiating for several weeks on its debt, which is one of the highest in the world. Argentina faces a deep economic crisis, the worst since 2001. The economy has been in recession for two years, while the poverty rate has reached about 40 percent, and inflation exceeded 50 percent in 2019.
Argentine public debt totals more than $ 311 billion, more than 90 percent of GDP, while more than $ 30 billion worth of bonds mature at the end of March.
The government is seeking to defer the maturities of some of its loans, and to reach an agreement with private creditors to reduce the amount. On March 4, the government announced that it had chosen HSBC, Lazard and Bank of America to assist it in the negotiation process.
In this context, President Alberto Fernandez said, from the center right, a few days ago, “The economy collapsed during the past year, and it will certainly continue this year, and I do not know in light of all this international tension if the crisis will deepen further.” The global situation makes it difficult for us to get out of the crisis. ”
Like the financial markets in the world that were affected by the Coruna virus, the Buenos Aires Stock Exchange declined and the country’s risks rose to more than 3,000 points, the highest level since 2005.
In addition, oil prices decreased significantly. It is a context that worries the government of Alberto Fernandez, who depends on the oil revenues extracted from the Faka Muerta oil field (south of the country) to get out of the crisis and revive the economy … However, the Minister of Energy, Matthias Colfas, stressed that «the companies’ interest in the Vaca Muerta field was not affected by the crisis » .
The Vaca Muerta oilfield extends over an area of 30,000 square kilometers in Patagonia, and accounts for 43 percent of the country’s total oil production. Many oil companies, including Chevron, Shell and Total, operate in this field, which the US Energy Department considers has the second largest shale gas reserves in the world and ranks fourth in the world in shale oil. This is a great source of revenue in this country, which is afflicted by recurrent economic crises and always looking for foreign currencies.
Activity began on the Faka Muerta field in 2013, and so far only 5 percent of its area is being used, according to Alejandro Instos of the Argentine Energy Institute. However, Instus considered that it was an illusion to believe that the field constituted a “winning lottery ticket” that would introduce foreign currencies into the country. The Vaca Muerta field has potential, but is supposed to be validated in competitive markets. ”
However, the expert sought to reassure the site’s future, saying, “The industry is looking at the long term. And major investment decisions are not taken on the basis of the current price of a barrel close to $ 30, or the price last January when it reached $ 70.
Ironically, the global economic picture may be beneficial to Argentina. “There is a strong slowdown in global economic activity, but I am optimistic about restructuring Argentine debt, because it will not be the same if we do it at a time when the world is burning and we are not the only problem,” said economist Pablo Tijani of the Hasser Company.
He added, “The benefits should be postponed at any cost, especially if people are unable to go outside. Interest rates will drop after the US Federal Reserve’s decision, and if all stocks and bonds fall, the deduction (in bonds) will be greater than expected for Argentines. ”