Argentina

During a pandemic that has wreaked havoc with global travel, Enrique Beltranena is something of a rarity: a happy airline boss. Volaris, his Mexican low-cost airline, has added, not cut, routes during the crisis, has a healthy balance sheet and is “cautiously optimistic” in its outlook, he said.

Countries do not usually gain friends when telling creditors they can’t pay them back. Yet Ecuador earned serious plaudits as it went about restructuring $17.4bn of bonds this year, GlobalCapital reported. The Ad Hoc Bondholder Group that owned more than half of the sovereign’s bonds even said that the process “set a precedent” for Covid-19 era restructurings. Jan Dehn, head of research at Ashmore, part of the Ad Hoc group, explains that on one hand the group was referring to modifications in collective actions clauses that some creditors hope will become standard practice.

An International Monetary Fund mission concluded a visit to Argentina on Sunday, after several days of preliminary talks aimed at repaying about $44 billion owed by the cash-strapped government to the fund, a government source said, Reuters reported. The delegation of IMF economists arrived early last week, led by Julie Kozack, Western Hemisphere deputy director for the IMF. “This first visit has concluded,” the government source told Reuters on condition of anonymity. Argentina recently restructured about $100 million in non-performing bonds.

Nearly half of Argentina’s population was living in poverty in the second quarter, a sharp increase from last year, as the country’s longstanding economic crisis deepened due to the coronavirus pandemic, researchers estimated on Wednesday, Reuters reported. The Catholic University of Argentina (UCA) estimated the poverty rate spiked to between 46% and 47% by the end of June following months of strict lockdowns to battle the spread of the virus.

Argentina will make interest payment due on dollar and euro-denominated “Par” bonds on Wednesday this week, the country’s Economy Ministry said in a statement on Monday, closing off an unresolved issue from its recent major debt revamp, Reuters reoprted. The government had failed to restructure a small number of bonds, including the Pars, as part of an otherwise successful $65 billion foreign debt restructuring, which saw 99% of eligible debt exchanged at the end of last month.

Argentina’s newly restructured dollar bonds have slumped in value less than a month after a deal was finalised to postpone debt payments, as fears grow about the country’s economic health, the Financial Times reported. On August 31, Argentina clinched near-unanimous approval from its bondholders to restructure $65bn of foreign debt after months of sparring. The country’s sovereign bonds began trading this month, and have already fallen towards distressed levels.

Argentine companies are facing an increasingly difficult task to keep up with payments on dollar debt, hiking the risk of a wave of corporate defaults after the country tightened access to foreign currency to stem a sharp decline in reserves, Reuters reported. The central bank move, which pressured firms to restructure their debts and tightened individuals’ access to greenbacks, jolted local markets, pummeled bond prices and equities and heightened demand for black market dollars.

Less than a month after Argentina’s $65 billion debt restructuring, bond prices show growing concern the government may struggle to pay its obligations, Bloomberg News reported. The country’s yield curve has inverted in the week since officials announced foreign-exchange restrictions to help conserve cash. Investors perceived the move as an act of desperation instead of a workable solution to stem the drain in foreign reserves, and prices for short-term bonds dropped.

Argentina’s unemployment rate jumped to 13.1% in the second quarter of the year as the country was swiped by the coronavirus pandemic, the official statistics agency said on Wednesday, the highest since 2004 and up from 10.4% in the previous quarter, Reuters reported. Argentina imposed a strict lockdown in mid-March, hitting an already shaky economy in recession since 2018 and leaving many businesses struggling to survive. The country now has over 650,000 confirmed cases of COVID-19.

Argentina’s economy contracted a record 19.1% in the second quarter versus the same period a year earlier as the coronavirus pandemic crippled production and demand, though was slightly better than analyst forecasts, Reuters reported. The steep fall, deeper than a 16.3% drop during Argentina’s major 2002 crisis, came as the South American country imposed a strict lockdown in mid-March to stem the virus. The country has over 640,000 confirmed COVID-19 cases, and nearly 13,500 deaths.