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Presidential candidate Fernández says the country is in virtual default, blames IMF
By Santiago Pérez
BUENOS AIRES -- Argentina's presidential front-runner said the government's new plan to restructure its short-term debt shows the country is virtually insolvent, as a crisis of confidence has wiped out private sector demand for government debt.
"Now, there is no one taking Argentine debt, or anyone who can pay it," said Alberto Fernández, who as candidate of the Peronist coalition is widely expected to win October's presidential election. "Argentina is in a virtual, hidden default."
Earlier this week, President Mauricio Macri's government unilaterally extended the maturity of all short-term paper and said it wants to restructure its debt with the International Monetary Fund, after the country's treasury was unable to roll over obligations with the private sector.
Markets reacted negatively, with S&P Global Ratings downgrading Argentina's debt to selective default on Thursday. "This has immensely stressed debt dynamics amid a depreciating exchange rate, a likely acceleration in inflation, and a deepening economic recession," S&P said in a release.
The IMF, which gave Argentina a $57 billion bailout in 2018, said Wednesday that it was assessing the measures.
In his first interview with a foreign-media outlet ahead of the election, Mr. Fernández said he was unwilling to support the government's emergency measures aimed at containing rising volatility. "The market now knows where they're headed," he said at his campaign headquarters, referring to the government's efforts to restructure short-term debt.
The latest bout of volatility hitting Argentine assets was sparked by Mr. Macri's crushing setback in a primary vote on Aug. 11 that made Mr. Fernández and his running mate, former President Cristina Kirchner, the favorites to win the Oct. 27 election by a wide margin. In Argentina, a nationwide primary vote is held before an election to decide which parties can field candidates, and is viewed as a strong indicator of the final election result.
The 60-year-old Mr. Fernández said that if elected, his administration would aim for a balanced budget eventually. But he first plans an ambitious program to restore purchasing power by increasing wages and government pensions, while containing inflationary pressures with a broad-ranging pact with employers.
"To reverse this cycle you must launch a plan to boost consumption, and I will not ask permission from the IMF for it," said Mr. Fernández.
The possible return to power of the nationalist Peronist movement, which is expected to unravel the economic overhaul Mr. Macri launched after taking office in 2015, has unnerved investors.
Dismissing market concerns about a potential Peronist victory, Mr. Fernández said that the $57 billion bailout from the IMF, its largest on record, is partly to blame for Argentina's financial-market slide.
Instead of being used to replace more expensive debt, Mr. Fernández said, the dollars from the IMF have evaporated in capital outflows as the government burned foreign-currency reserves to contain the steady depreciation of the Argentine peso. The central bank has spent close to $1.5 billion to meet rising demand for dollars since mid-August, or about 10% of its net foreign-currency reserves.
"The current crisis is a case of déjà vu," he said in recalling the country's financial collapse in 2001 that led to its default on $100 billion in government debt, a record at the time. His disagreements with the IMF's conditions are also similar, he added.
"What I want them to understand in the IMF is that they are guilty of this situation," Mr. Fernández said. "It was an act of complicity with the Macri administration. It was humankind's most expensive reelection campaign, and they gave money to a compulsive spender."
The IMF declined to comment. It said earlier this week that senior staff members met with Mr. Fernández and his economic advisers "for a productive exchange of opinions."
Mr. Fernández said he made it clear he doesn't support Mr. Macri's austerity measures to balance the government's budget, which were among conditions agreed with the IMF.
"Mr. Macri's government caused damage similar to what Argentina suffered in 2001: a debt default, no foreign-currency reserves, a steep devaluation and increased poverty," he said.
Argentina has defaulted eight times on its foreign debt through its 200-year history. It has also received close to 30 support packages from the IMF, which has had a rocky relationship with previous Peronist leaders.
Many economists say Argentina now lacks the financial firepower to stimulate the economy, which contracted by 5.8% in the first quarter from a year earlier. And not everyone blames Mr. Macri for the country's latest financial debacle.
"The government made the right decision, taking into account the current situation," said José Luis Machinea, a former finance minister and central-bank governor. "Political uncertainty linked to the outcome of the primary caused the renewal of short-term debt to collapse. In that respect, it's hard to blame the government."
Mr. Fernández, a veteran politician who likes to play guitar and listen to Argentine rock music, has extensive links across a Peronist movement that includes organized labor, far-left groups and conservative provincial governors.
He is also seen as more pragmatic than Mrs. Kirchner, who nationalized foreign companies and imposed capital controls when economic conditions deteriorated toward the end of her term.
Mr. Fernández said he is against capital controls and expropriations. He said that if he wins, he will seek to attract foreign investment, focusing on efforts to continue developing the vast Vaca Muerta formation, home to one of the world's largest deposits of shale oil and gas.
"For us, it's startling that the world believes that Macri is the solution," he said.
Write to Santiago Pérez at [email protected]
By Santiago Pérez
BUENOS AIRES -- Argentina's presidential front-runner said the government's new plan to restructure its short-term debt shows the country is virtually insolvent, as a crisis of confidence has wiped out private sector demand for government debt.
"Now, there is no one taking Argentine debt, or anyone who can pay it," said Alberto Fernández, who as candidate of the Peronist coalition is widely expected to win October's presidential election. "Argentina is in a virtual, hidden default."
Earlier this week, President Mauricio Macri's government unilaterally extended the maturity of all short-term paper and said it wants to restructure its debt with the International Monetary Fund, after the country's treasury was unable to roll over obligations with the private sector.
Markets reacted negatively, with S&P Global Ratings downgrading Argentina's debt to selective default on Thursday. "This has immensely stressed debt dynamics amid a depreciating exchange rate, a likely acceleration in inflation, and a deepening economic recession," S&P said in a release.
The IMF, which gave Argentina a $57 billion bailout in 2018, said Wednesday that it was assessing the measures.
In his first interview with a foreign-media outlet ahead of the election, Mr. Fernández said he was unwilling to support the government's emergency measures aimed at containing rising volatility. "The market now knows where they're headed," he said at his campaign headquarters, referring to the government's efforts to restructure short-term debt.
The latest bout of volatility hitting Argentine assets was sparked by Mr. Macri's crushing setback in a primary vote on Aug. 11 that made Mr. Fernández and his running mate, former President Cristina Kirchner, the favorites to win the Oct. 27 election by a wide margin. In Argentina, a nationwide primary vote is held before an election to decide which parties can field candidates, and is viewed as a strong indicator of the final election result.
The 60-year-old Mr. Fernández said that if elected, his administration would aim for a balanced budget eventually. But he first plans an ambitious program to restore purchasing power by increasing wages and government pensions, while containing inflationary pressures with a broad-ranging pact with employers.
"To reverse this cycle you must launch a plan to boost consumption, and I will not ask permission from the IMF for it," said Mr. Fernández.
The possible return to power of the nationalist Peronist movement, which is expected to unravel the economic overhaul Mr. Macri launched after taking office in 2015, has unnerved investors.
Dismissing market concerns about a potential Peronist victory, Mr. Fernández said that the $57 billion bailout from the IMF, its largest on record, is partly to blame for Argentina's financial-market slide.
Instead of being used to replace more expensive debt, Mr. Fernández said, the dollars from the IMF have evaporated in capital outflows as the government burned foreign-currency reserves to contain the steady depreciation of the Argentine peso. The central bank has spent close to $1.5 billion to meet rising demand for dollars since mid-August, or about 10% of its net foreign-currency reserves.
"The current crisis is a case of déjà vu," he said in recalling the country's financial collapse in 2001 that led to its default on $100 billion in government debt, a record at the time. His disagreements with the IMF's conditions are also similar, he added.
"What I want them to understand in the IMF is that they are guilty of this situation," Mr. Fernández said. "It was an act of complicity with the Macri administration. It was humankind's most expensive reelection campaign, and they gave money to a compulsive spender."
The IMF declined to comment. It said earlier this week that senior staff members met with Mr. Fernández and his economic advisers "for a productive exchange of opinions."
Mr. Fernández said he made it clear he doesn't support Mr. Macri's austerity measures to balance the government's budget, which were among conditions agreed with the IMF.
"Mr. Macri's government caused damage similar to what Argentina suffered in 2001: a debt default, no foreign-currency reserves, a steep devaluation and increased poverty," he said.
Argentina has defaulted eight times on its foreign debt through its 200-year history. It has also received close to 30 support packages from the IMF, which has had a rocky relationship with previous Peronist leaders.
Many economists say Argentina now lacks the financial firepower to stimulate the economy, which contracted by 5.8% in the first quarter from a year earlier. And not everyone blames Mr. Macri for the country's latest financial debacle.
"The government made the right decision, taking into account the current situation," said José Luis Machinea, a former finance minister and central-bank governor. "Political uncertainty linked to the outcome of the primary caused the renewal of short-term debt to collapse. In that respect, it's hard to blame the government."
Mr. Fernández, a veteran politician who likes to play guitar and listen to Argentine rock music, has extensive links across a Peronist movement that includes organized labor, far-left groups and conservative provincial governors.
He is also seen as more pragmatic than Mrs. Kirchner, who nationalized foreign companies and imposed capital controls when economic conditions deteriorated toward the end of her term.
Mr. Fernández said he is against capital controls and expropriations. He said that if he wins, he will seek to attract foreign investment, focusing on efforts to continue developing the vast Vaca Muerta formation, home to one of the world's largest deposits of shale oil and gas.
"For us, it's startling that the world believes that Macri is the solution," he said.
Write to Santiago Pérez at [email protected]
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