Argentina wants a peaceful negotiation with private creditors but President Alberto Fernández says the top priority is a sustainable debt load, signalling a haircut is likely coming.
“We prefer an orderly resolution to the debt crisis and we’re moving in that direction,” the president indicated on Sunday at Congress’sopening legislative session for 2020. “But the most important thing is that the deal we reach with creditors is sustainable.”
The Peronist leader added that his government will only make commitments it can keep to investors, and that will serve as a focal point of negotiations.
Economy Minister Martín Guzmán is expected to make a formal offer to creditors in the second week of March. He intends to close talks by March 31, a timeline that analysts say is too tight.
“We must make commitments we can achieve,” pointed the ex-Cabinet chief, who took office December 10. “This premise will be at the base of the offer that we’ll make to creditors in the coming weeks.”
The 60 year old official has repeatedly affirmed Argentina needs more time to pay back creditors and grow the economy, without offering specifics. Argentina’s economy is expected to contract in 2020 for the third straight year, while inflation is above 50 percent and unemployment remains high.
All investors in Argentine debt expect officials to offer a haircut of some kind this month – the question is how much. In February, Guzmán warned of a “deep debt restructuring,” and the International Monetary Fund (IMF) called Argentina’s debt load unsustainable and urged private creditors to make a “meaningful contribution.”
The IMF’s view could give more leverage to Fernández’s administration to impose a steep haircut on Argentine bondholders. Argentina is also renegotiating its record US$56-billion IMF credit line. Talks continue to speed up, with IMF officials scheduled to land in Buenos Aires on Monday, the third round of talks in as many weeks.
Beyond the debt, the ‘Frente de Todos’ leader touched on several subjects in a speech that stretched beyond an hour. He announced an ambitious agenda to change the country’s judicial system, introduce pension reform and legalise abortion – a contentious issue in a nation where the Catholic church holds heavy influence and where Pope Francis calls home.
by Patrick Gillespie, Bloomberg