Argentina

Argentina’s new Peronist government has been caught off guard by global financial market turmoil at a crucial point in its talks with creditors to restructure more than $100bn of foreign debt, raising the risk that the negotiations could be delayed and result in a messy default, the Financial Times reported. Martin Guzmán, economy minister, has met investors for preliminary talks and was due to unveil the government’s initial offer this week.

Argentina said it intends to restructure as much as $68.8 billion in bonds issued under foreign law, a formal step in negotiations with creditors, Bloomberg News reported. It’s the first time President Alberto Fernandez’s government has explicitly stated the nominal value of debt held by foreign bondholders it plans to restructure. The two sides are in fast-paced negotiations that Economy Minister Martin Guzman intends to conclude by the end of March. The midnight government decree came hours after Argentine bonds plunged to record lows amid falling oil prices and coronavirus fears.

Argentina’s latest debt dilemma is whether to pay or delay its local peso debt, Bloomberg News reported. While the country’s billions of dollars in foreign debt with private creditors and the International Monetary Fund have been the primary focus for investors, the nation now faces a hurdle that’s just as large: the almost 1.8 trillion pesos ($29 billion) in local debt maturing this year, an amount roughly equivalent to all the cash in circulation in the country. And while the fact that it’s in pesos should have lessened the burden, Argentina is finding it tough to refinance.

Argentina’s minister of economy met with representatives of several major creditors, including asset management firm Pimco, a company executive and a ministry source said on Wednesday, as separate talks continued with the International Monetary Fund, Reuters reported. “We accepted an invitation to visit the ministry to discuss a range of issues (with Economy Minister Martin Guzman) on a one-to-one basis,” said Pramol Dhawan, head of the emerging markets portfolio management team at Pimco, a major holder of Argentine debt. Pimco is a unit of Allianz SE.

Uruguay’s new government wants to offer tax breaks to entice wealthy Argentines to relocate across the River Plate to boost local investment, but the rich need little encouragement to leave. Ever since Alberto Fernández took power in Buenos Aires in December and hiked taxes on personal assets, Argentines have been weighing the benefits of emigrating to escape what many see as confiscatory taxes, the Financial Times reported. The tax rate on assets held abroad is now double the local rate — up to 2.5 per cent — which is triple the level under the previous government.

A new program being discussed by Argentina and its biggest lender, the International Monetary Fund, could set up private bondholders for heavy losses without requiring the spending cuts needed to make the country solvent, investors say, Reuters reported. Argentina and the IMF announced last month they would start Article IV consultations - allowing the Fund to inspect Argentina’s accounts - as a stepping stone to a possible new program that would replace a defunct $57 billion loan agreement struck by the previous government in 2018.

The International Monetary Fund will send another mission to Argentina to continue debt strategy talks and discuss “next steps,” an IMF spokesman said on Thursday, as the South American nation seeks to renegotiate its $57 billion financing package, Reuters reported. The IMF technical team will arrive in Buenos Aires next week for meetings with economy ministry officials about the government’s economic program, the spokesman said. The fund’s last mission to Argentina ended just over a week ago.

As Argentina descends into a hellscape for creditors, with bond prices taking a fresh leg down as each new development saps spirits, there are a few securities bucking the trend, Bloomberg News reported. Investors are sorting through billions of dollars of Argentine debt, some of it trading at deeply distressed levels below 50 cents on the dollar, in search of bonds that are being unfairly punished for the federal government’s problems.

In mid-August, Argentina’s farmers, en masse, ran out of patience. They wanted the cash they were owed and wanted it fast, Bloomberg News reported. Days earlier, leftist politician Alberto Fernandez had scored a resounding primary victory that made clear he’d win the October presidential election, and speculation was starting to swirl that he’d impose new taxes. One after another, the farmers called their grains brokers to lock in prices on the soybean cargoes they had already turned over and collect the proceeds.

Investors are braced for acrimonious negotiations with Argentina and a possible default after the IMF backed a big haircut for creditors without urging the country to implement austerity measures. Bondholders were alarmed when the IMF failed to demand that Argentina rein in its budget deficit, the Financial Times reported. They feared that the fund was siding with President Alberto Fernández, whose government has insisted that it will only reach a balanced budget by 2023, with no reduction this year.