Argentina to Hold Talks With Bondholders to Delay Debt
Argentina Says it Will Open Talks With Bondolders to Delay Debt
(Bloomberg) -- Argentina’s new Economy Minister Martin Guzman outlined broad themes on Wednesday regarding looming policy proposals to revive the economy, but didn’t delve into the specifics that Argentines and investors have waited months to hear.
The country will open talks with bondholders to delay the nation’s debt payments, Guzman said in his first public comments as minister, adding that he’s already negotiating with the International Monetary Fund for a new program amid a recession. He believes investors understand Argentina can’t currently pay its debt.
Guzman, a former researcher at Columbia University, takes the reins of the Argentine economy under President Alberto Fernandez’s new government, which faces a severe economic crisis, challenging creditor talks and a record $56 billion IMF credit line. On Wednesday he toed a fine line between acknowledging Argentina’s economic woes and the reality of having no access to cash.
Argentina must modify its debt schedule so the economy can grow, he said, and noted that the lack of access to financing means the country can’t increase its fiscal deficit. His comments echoed Fernandez, who said in his first day in office that Argentina wants to meet debt obligations but must first grow.
“We’re going to fix the virtual default the country is in,” Guzman told reporters at a press conference in Buenos Aires. “Argentina doesn’t want confrontation with creditors, it wants to be constructive.”
Guzman also dismissed a detailed presentation on the nation’s debt he made less than a month ago. At a United Nations conference held Nov. 19 in Geneva, Guzman recommended that Argentina delay payments on capital and interest for two years and argued for concluding negotiations by March 2020. When asked Wednesday if he maintained those views, he said that the presentation didn’t reflect his current approach as a minister. He added that he would release the details of his debt plan in writing.
“Failed” IMF Plan
Guzman said the country’s existing program with the IMF “failed” and that he had already begun talks with its officials. The IMF granted Argentina a record loan in June 2016 as the government, then led by President Mauricio Macri, faced a currency crisis. Fernandez lambasted the Fund on the campaign trial for its austerity plan, which he blamed as partly responsible for Argentina’s recession.
The IMF confirmed Wednesday that its Managing Director Kristalina Georgieva met with Guzman before he took office. IMF Chief Spokesman Gerry Rice is expected to give more details about Guzman’s meeting with Georgieva Thursday morning at a press conference in Washington.
Guzman also said the government will ask Congress in the coming days to hold “extraordinary sessions” to debate a “solidarity and economic reactivation” program.
“The focus on growth and poverty relief is as clear as it was during Fernandez’s inauguration speech, but we remain in the dark on how that will be achieved, and how the inflationary impacts will be mitigated -- and the fact that he said interest rate is not the only tool to fight inflation leaves the risk of price freeze in the air.”
- Adriana Dupita, Latin America economist with Bloomberg Economics
Analysts and investors, who have been awaiting details on Argentina’s economic program since he was elected October 27, pointed to the lack of a roadmap in the minister’s remarks.
“Argentina knows the problem but doesn’t yet have a solution,” said Siobhan Morden, head of Latin America fixed income strategy at Amherst Pierpont in New York. Other than hoping for economic growth “there is no plan.”
Guzman’s speech also kept analysts guessing on whether he will seek to impose harsh terms on bondholders. Fernandez had previously suggested he sought to impose minimal losses.
“His view of debt being unsustainable could suggest some haircut, but it could also be compatible with a re-profiling, if the economy recovers in between,” said Alejo Costa, the chief strategist at BTG Pactual Argentina in Buenos Aires.
During his press conference, Guzman did not clarify whether the country will continue to make debt payments during the debt talks.
Capital controls, which were implemented in September after the peso plunged in August following a primary vote, will remain in place until the “economy is calm,” he added.
The Economy Ministry also released a statement announcing Guzman’s team, including Raul Rigo as Treasury Secretary, Diego Bastourre as Finance Secretary, and Haroldo Montagu as Economic Policy Secretary. The team will also propose Sergio Chodos as the Southern Cone’s director to the IMF.
Guzman acknowledged that building credibility won’t happen overnight.
”Reputation isn’t something you earn from one day to the next, you have to build your reputation showing a consistent macroeconomic plan,” he said.
--With assistance from Sydney Maki, Ben Bartenstein and Scott Squires.
To contact the reporters on this story: Patrick Gillespie in Buenos Aires at pgillespie29@bloomberg.net;Jorgelina do Rosario in Buenos Aires at jdorosario@bloomberg.net
To contact the editors responsible for this story: Juan Pablo Spinetto at jspinetto@bloomberg.net, Carolina Millan, Robert Jameson
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