Every time the Argentine political establishment reaches unusual unanimity, be sure the country is in trouble.
On Wednesday, the lower house of Congress did not need a marathon debate to arrive at an overwhelming majority of 224 votes versus two, and one abstention, to acknowledge that Argentina will be facing a defining make-or-break negotiation over its public debt and, ultimately, the future of its economy.
President Alberto Fernández has conditioned the country’s entire economic programme to the outcome of the dual negotiation that the administration is kicking off with the holders of the country’s debt abroad and the International Monetary Fund (IMF). Somewhat arbitrarily, but not so much given the demanding schedule of payments due during the second quarter of the month, the president has himself imposed a deadline of March 31 to complete the debt renegotiation process.
The bill passed by the Chamber of Deputies on Wednesday – which will most likely be turned into law by the Senate next week – gives the Casa Rosada total control over the negotiations. The administration does not legally need the endorsement to open or even conclude the talks with creditors, but it has said it wanted to have it in order to have more political strength.
With great power comes great responsibility. Most of the burden now falls on the office of Economy Minister Martín Guzmán, whom the president has given exclusive faculties in his economic Cabinet to lead – and speak in public about – the debt issue. This week Guzmán flew to New York for the first time since he came back to Argentina (also from New York where he lived for almost a decade) to take the ministerial post. Predictably, the government continues to hide its cards, as anybody would do in this type of game of chicken, and Guzman had next to no new details to give his interlocutors in New York who, also predictably, complained about it. All things are as they should be at this stage.
But now we know the debt negotiations will speed up in the coming weeks. According to a chronology of events published this week, by mid-February the creditors will get a taste of Argentina’s vision with the publication of some broad “guidelines,” and in the second week of March they will receive Argentina’s formal proposal. They will have roughly two weeks to look into it and produce their verdict by the end of March.
For now, the biggest question surrounding the talks is whether the Fernández government will, besides asking for more time to pay, also ask for a haircut in the amount it has to pay. Joseph Stiglitz, the Nobel Laureate in Economics and Guzmán’s intellectual mentor, said at last week’s World Economic Forum in Davos that there should be “significant haircuts.” This week, he added that interest should also be slashed in order to reach “a real solution.” To many, Stiglitz acts as an unofficial sponsor of Argentina’s debt case.
The political establishment’s sporadic consensus in times of emergency tends to be the result of recurrent cracks and futile disagreement over relevant issues in the day-to-day of the country’s management. Argentina’s leadership finds common ground when it seems to be too late, arguably without noticing that crisis arrives after an earlier lack of accord, guided by automatic bickering.
This week, for instance, the country heard former president Mauricio Macri telling a group of followers in the mountain holiday town of Villa La Angostura, in Patagonia, that he had repeatedly warned his team of economists that taking on too much debt would eventually take Argentina downhill – and fast. The country did descend into economic quagmire in Macri’s last two years, and still the president had publicly defended his debt record all the way until losing his re-election in October (truth be told, by a thinner margin than expected). The opposition’s vote in favour of the debt bill is the unofficial admission of that mistake.
But now that the odd moment of unity among despair is back, it remains to be seen if there is a clear understanding that the outcome of the debt negotiations will make or break the rest of Fernández’s time in office – and beyond. The president himself seems to know it, and the test case that Buenos Aires Province Governor Axel Kicillof is presenting his own bondholders – which includes a petition to postpone a capital payment of just US$250 million – might serve as an early indication of how much patience the creditors have left to stomach Argentina’s debt recidivism.
We’ll soon find out.