Buenos Aires (AFP)
The new Argentine president keeps repeating: his country needs growth to be able to repay its public debt. With this directive, his Minister of Economy Martin Guzman went to New York this week to negotiate with private creditors and the IMF.
Barely two months after his arrival, reducing the debt burden is a priority for the center-left head of state. He hopes to reach an agreement before March 31, the date from which the amount of maturities will be higher.
The third economy in Latin America, the most indebted country in the region, is in recession, its inflation reached 53.8% in 2019 while the poverty rate hovers around 40%.
- How much is the debt? -
Argentina has a total debt of some $ 311 billion, or 91.6% of GDP, according to the latest figures from the Argentine Ministry of Economy, as of September 30, 2019. An IMF projection recently reported debt total of $ 335 billion.
Of this total of 311 billion, the objective is to refinance the debt with holders of private bonds for an amount of 121.9 billion (35.9% of GDP) as well as with bilateral and multilateral organizations, for 72 .6 billion (21.4%).
The rest of the debt, or 116.5 billion (34.3%), is internal to the Argentine public sector, in particular the Central Bank, the Bank of the Argentine Nation and the pension system, which refinances its maturities and is not found therefore not in default of payment, explains to AFP the economist Marina Dal Pogetto, of the cabinet EcoGo.
- How much has it increased? -
In 2015, when Mauricio Macri's Liberal government arrived, Argentina's public debt was 240.6 billion (52.6% of GDP).
In the absence of sufficient foreign investment, the former head of state began to issue debt until an increase in interest rates in the United States in mid-2018 pushed away the capital, leading to devaluation and rising inflation which prompted Argentina to seek assistance from the Fund.
The IMF has granted a loan of $ 57 billion, of which only 44 have been paid, President Fernandez requesting upon his arrival the cessation of disbursements.
- Is it possible to negotiate the debt? -
The head of state says that Argentina needs to quickly resolve the debt problem. "The idea is that we are given the opportunity to grow, to be able to export and raise dollars to be able to pay," he explains without revealing his game too much.
"We are facing negotiations and therefore we must be careful and keep certain reservations," said Fernandez.
An element worried however: the debt of the province of Buenos Aires, which amounts to 250 million dollars, could fall into default if an agreement is not found by Friday with 75% of the creditors.
If the debt of the province and the country are two separate things, a possible default would have the worst effect, analysts said.
- What can Argentina do? -
Economist Marina Dal Pogetto believes that the debt level of the South American country is manageable.
"There is no over-indebtedness, Argentina's problem is its track record," she said to AFP, referring to the 2001 default, for nearly $ 100 billion, the highest in history.
"No country can pay its debt with its cash flow, all refinancing. The Macri government has tried to continue paying with international reserves to a certain extent, and then it has rescheduled" part of its debt. Argentina's reserves currently stand at $ 45 billion.
Argentina's parliament is scheduled to begin consideration of a bill this week to restructure the country's public debt. In this text, it is "requested that the country improves at least two of the following three conditions: the deadlines, the interest rates and the amount of capital," said Minister Martin Guzman.
The maturities in 2020 are equivalent to 34.3 billion dollars, of which 30 depend on local legislation and 4.3 on foreign legislation, which implies possible arbitrations by other jurisdictions.
According to the firm Capital Economics, Buenos Aires should request the cancellation of part of its debt, contrary to the first statements by Mr. Fernandez assuring that there would only be postponements.
© 2020 AFP