Thursday, June 13, 2024

ARGENTINA | 09-05-2020 08:15

May 2nd-May 9th: What we learned this week

Key stories that caught our eye over the last seven days in Argentina.


At press time yesterday there were 5,611 confirmed cases of Covid-19 and 293 deaths in Argentina, as compared to 4,428 cases and 220 deaths the previous Friday. On Monday face-masks became obligatory in this city while pressures to permit more economic activities mounted. On Thursday Education Minister Nicolás Trotta said that there would be no return to schoolroom classes until there was a vaccine against coronavirus while also confirming that there would be no grading in schools this year – that day the Carpe Diem retirement home in the Recoleta neighbourhood had to be evacuated with 25 cases of coronavirus. Yesterday evening President Alberto Fernández was scheduled to announce a further fortnight of quarantine accompanied by speculation that he might free as much as three-quarters of the workforce to resume activity but with any mass events and transport beyond the local still banned.


The complete results for the government’s debt-swap offer to creditors are not expected until later today but preliminary data pointed to acceptance falling below 40 percent. But the markets closed the week with a more bullish outlook ahead of deadline expiry with country risk down to 3,319 points, its lowest level since March, and Argentine bonds in New York improving by as much as 11 percent while MerVaI local stock exchange edged up 0.9 percent for a double-digit gain in the week. But the exchange market was less impressed with the “blue” dollar hitting a new record at 122 pesos while the official exchange rate stayed put at 69.25 pesos (Banco Nación).


Economy Minister Martín Guzmán confirmed on Tuesday that, as widely expected, Argentina would not be meeting that day’s deadline for repaying US$2.1 billion to the Paris Club but added that the group of creditor countries was receptive to reprogramming the debt and that negotiations would proceed with Argentina also requesting a significant interest rate reduction. Guzmán pleaded that a crisis now com- pounded by the coronavirus pandemic would result in an economic shrinkage of at least 6.5 percent. On March 13 Argentina had asked the Paris Club to roll over this debt for a year until May 5, 2021, but received no reply. Last week President Alberto Fernández rang up German Chancellor Angela Merkel to remind her of the necessity to postpone this Paris Club payment and ask for her help. Last Tuesday’s deadline stemmed from the controversial agreement with the Paris Club signed in 2014 by current Buenos Aires Province Governor and then Economy Minister Axel Kicillof.


Nobel Prize winners Joseph Stiglitz and Edmund Phelps have teamed up with Harvard Cuban-US economist Carmen Reinhart to author an open letter praising Argentina’s bond swap offer to creditors just two days before its expiry yesterday. They described the offer – “a three-year grace period with a minor cut in capital and a significant cut in interest” – as “responsible ... constructive .. in good faith and with the support of all domestic political sectors” while assuring creditors that it would make their revenue flow sustainable, even if lower. A successful offer would set a positive precedent not only for Argentina but also for the whole international financial system as a whole where highly indebted developing countries suffer the most from the global recession stemming from the coronavirus pandemic. The trio’s open letter was co-signed by 138 fellow-economists including Jeffrey Sachs, Kenneth Rogoff and French best-selling author Thomas Picketty among the best-known names.


The CAF (Corporación Andina de Fomento) Development Bank for Latin America said late Tuesday it would approve a four-year US$4 billion package of financing earmarked mainly for infrastructure projects in Argentina, adopting proposals under consideration since November but also including an extra US$340 million to help the country fight the Covid-19 pandemic. The CAF commitment to Argentina was restated in a video conference between CAF CEO Luis Carranza Ugarte and President Fernández. According to the CAF, US$900 million of the package would be delivered this year. On Thursday the CAF initiative was followed by the InterAmerican Development Bank (BID in its Spanish acronym) announcing a loan of US$1.8 billion to face the socio- economic crisis triggered by the coronavirus pandemic, the biggest BID loan to Argentina in a decade. The loan has a three-pronged purpose: to help public health, job creation and the most vulnerable sectors.


Deliver y workers protested and walked off the job briefly in Buenos Aires on Friday, demanding better working conditions and safety equipment to work with during the new coronavirus pandemic. Many citizens increasingly rely on them, who suffer low wages.


Both houses of Congress tested for virtual sessions last week, the Senate successfully and the lower house unsuccessfully, while the Juntos por el Cambio opposition continued to press for the physical presence of as many deputies as possible within the limits of social distance.


Vice-President Cristina Fernández de Kirchner has reiterated her “lawfare” charges against the Mauricio Macri presidency before the Inter-American Commission on Human Rights (CIDH in its Spanish acronym), accusing Argentina’s previous government of “political discrimination and persecution” with special reference to the trial of the 2013 Memorandum with Iran where the then president is accused of attempting to cover up the Islamic republic’s alleged responsibility for the 1994 terrorist bomb destruction of the AMIA Jewish community centre. Her lawyers Graciana Peñafort and Alejandro Rúa asked the CIDH to place this case within the context of “lawfare” throughout the region.


Aerolíneas Argentinas and Austral air- lines announced Tuesday that they would merge at the next shareholders’ meeting in anticipation of the crisis facing world aviation. The move is designed to reduce the need for state subsidies (Aerolíneas losses last year totalled US$680 million with worse to come) by avoiding the duplication of structures and overlapping management while seeking the economies of scale. While passenger traffic remained frozen, Aerolíneas would be placing greater emphasis on freight, Ceriani also said. In other aviation news, Chile’s JetSmart low-cost airline is defying the bleak outlook for aviation with all ticket sales suspended until September 1 to seek sufficient help from the Argentine and Chilean governments (including tax breaks and preferential loans) to stay in business while one of the few flights running in Argentina last week ended fatally when it crashed near its destination of Esquel, killing a doctor and nurse flying in to rush a critically ill three-year-old girl to this city and leaving the pilot and co-pilot fighting for their lives.


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