Facing default, Argentina's Macri seeks debt rescheduling

[sandensea]

Amid the worst economic crisis in nearly two decades and facing a likely default, Argentine Economy Minister Hernán Lacunza today announced that his office will be seeking a partial debt rescheduling.

The re-scheduling would affect $57 billion in debt - much of which currently yields 75% interest in pesos or 7% in dollars.

No principal reduction - or "haircut" - was proposed. Instead, Lacunza is seeking to swap $7 billion in debt maturing within the next few weeks for debt payable within 6 months.

A "voluntary reprofiling" of $50 billion of longer-term debt will also be sought.

Argentina's $330 billion public debt has grown 50% in 4 years and now consumes 16% of the national budget.

The high yield on these notes had made them popular investments until Monday - when only 5% of $1.6 billion in maturing dollar-denominated 'Letes' were rolled over.

Because the proceeds are largely being dollarized and wired overseas, these maturities are contributing to a rapid depletion of Argentina's foreign exchange reserves - which fallen by over $10 billion in August to $58 billion.

Net reserves, however, have dwindled to $13 billion - well below this year's projected current account deficit of $20 billion, as a result of mounting foreign debt interest outlays.

International Macri Fund

Lacunza also mentioned the possibility of rescheduling $45 billion in IMF debt, most of which is due by 2023.

This debt is part of a record, $57 billion bailout granted to Argentina in June 2018 - reportedly at the insistence of U.S. President Donald Trump, who sought to boost re-election chances for right-wing President Mauricio Macri (a longtime personal friend).

The political motivation behind the bailout led local critics to refer to the IMF as the "International Macri Fund."

Macri was instead dealt a drubbing by voters on August 11, losing by 16% to center-left candidate Alberto Fernández.

Fernández has repeatedly called on Macri to reschedule Argentina's $200 billion foreign public debt - the most problematic type, as it can only be serviced in dollars or other hard currencies.

Back to the Future

The proposals drew comparisons to Argentina's infamous, July 2001 "Mega Swap."

The Mega Swap involved an exchange of 37 types of notes and bonds for longer-term, higher-interest bonds. The swap was accepted by most bondholders, and delayed up to $30 billion in payments but added $38 billion in additional interest payments in the out years.

The Mega Swap was a boon to banks seeking to unload Argentine bonds – but failed to stem the crisis or avoid a default just six months later.

Of the $82 billion in defaulted bonds that had to be restructured in 2005 (triggering a wave of holdout lawsuits), 60% were issued in the Mega Swap.

At: https://translate.google.com/translate?hl=en&tab=wT&sl=es&tl=en&u=https%3A%2F%2Fwww.baenegocios.com%2Fpolitica%2FGobierno-anuncia-un-canje-de-deuda-para-estirar-los-vencimientos-20190828-0039.html



Argentine officials (left) discuss today's debt rescheduling proposal with visiting IMF officials.

Today's announcement, if enacted, will postpone some short-term, high-interest obligations until next year - when a new administration is expected to be in office.

Javier Milei, a libertarian Argentine economist, noted that "if a government fails to repay debts at the agreed-upon time and terms, and if, moreover, it swaps the debt at rates other than market rates, it's a selective default."

[Judi Lynn]

1. Looks like a hit and run, doesn't it? Smash and grab? Wow. It makes one's head spin.

I did notice right a way, the woman in the meeting is wearing clothing almost the color of the table, with long parallel lines, like the table. That was interesting!

That reminds me I heard Carol Burnett say, once, in a conversation, that Tim Conway and his wife remodeled their living room, had plaid material lining the walls, then, some nice plaid furniture of the same colors and pattern, and they had clothes made for themselves of the nice plaid in the same color and design, and they invited Carol and others from the show over to see their new living room, and they wore their nice living room suits for the occasion. Carol Burnett said the guests took one look at it and couldn't stop laughing for a very long time, and they went to a lot of trouble to surprise their guests with that prank.

It would have been too cool to witness!

Can't believe after doing so much damage to not only the country's foreign debt, driving people out of business, driving many people into bankruptcy, destroying so many jobs, ruining so many lives, "making the economy scream," as Richard M. Nixon would describe it, now Macri and company will just slide back and let the whole load come crashing down on the next President. All in 4 years. Sounds possibly just as bad as what Nixon did to Allende in Chile.

Amazing, sandensea. Thanks for the latest, by all means. We need to know, and we usually just don't hear about I

Earlier, read this article regarding Cristina in a Wiki on her Presidency, saw the following info. which was very interesting:

In March 2010 Fernández made an historic amends trip to Peru a country with whom relations had been adversely affected following the Carlos Menem administration's illegal sale of weapons to Ecuador in the 1990s.[58] In the same month Fernández received the visit of Secretary of State Hillary Clinton in Buenos Aires, where she received great support for the way her administration was managing the foreign debt issue [59] and emphasized the positive relationship between the two countries[60] something which was not reported by local major news media [61]

https://en.wikipedia.org/wiki/Presidency_of_Cristina_Fern%C3%A1ndez_de_Kirchner

It also wasn't mentioned in any of the US "news" sources. Isn't that not-so-unexpected?

Had been remembering at various times how the agriculture producers seemed to be at war with Cristina from the first. In the same Wiki. article, it said " Kirchner called on farmers to act "as part of a country, not as owners of a country."[21]" Also remember that Clarín waged war on her every day she was in office, too. All those fascists were hounding her day and night, so she wasn't really a stranger to persecution by the time Macri's mob took over directly and conducted a more conspicuous war on her after that. All of them hard-right greedy reactionaries. What a mess.

Hope the next President will get a chance to overcome the hell Macri has designed for him, to drag him down far enough they can make him look like a failure long enough he won't be able to get anything important done, so they can then beat him down and slime their way back into office!

This Fernández will probably have the full support of a great many people coming in, however, and fewer women-haters trying to attack this progressive president than hounded Cristina.

Thanks for the information concerning shifting the heavy lifting to the good President who will be trying to put things back together.

[sandensea]

2. Alberto Fernandez will certainly inherit a very difficult situation: A debt crisis, amid depression

You may recall that Daniel Scioli (the last nominee Mrs. Kirchner endorsed) warned in 2015 that electing Macri would lead to this very crisis now.

"Another 2001" as he put it.

Or, indeed, another 1981 - as this 'borrow-billions-and-wire-it-overseas' heist (the 'bicycle', as Argentines refer to it) is exactly what the dictatorship encouraged at the time.

Those two experiences - and the fact that Macri's very much the dictatorship's ideological heir - should've clued "the markets" in to the fact that his presidency was going to led to another debt fiasco.

Just as the dictatorship ended up being - and they, too, were backed at first by the "markets."

To all that, of course, we should add Trump's arm-twisting the IMF into lending Macri those $45 billion.

Since Argentina can't repay that in 4 years, the only solution for the IMF will be to work with Fernández and convert that 4-year stand-by loan into a 10-year extended facility.

If they don't, guess who the IMF will have to turn to for a bailout: U.S. taxpayers - all thanks to Cheeto's obsession with propping up his old pal (in vain).

But then, you what they say about those who forget history.

Especially in Argentina!