Daniel Fernández Canedo
03/07/2020 - 12:32
Legend has it that on the end of the meeting between the Minister of Economy and the representative of one of the main foreign investment funds holders of Argentine bonds came to a synthesis.
The banker accepted the thesis that Argentina cannot meet the payment of the bonds and said it is in a position to extend the payment terms in exchange for Argentina setting an annual interest rate of 6% in dollars for the new securities . Martín Guzmán was categorical: "More than 3% is impossible . " They continued talking about formalities and after a few minutes the meeting ended.
With nuances, at least three of the financiers who attended the round of meetings with the Minister of Economy (representatives of the Pimco, Greylock, Templeton, BlackRock, Fidelity and Northern Trust funds) had similar experiences.
Guzmán spoke of the impossibility of paying the debt and stressed that the result of the negotiation must generate a "sustainable" scheme that allows creditors to comply and leave room for the growth of the economy. That is, more term and remission of interest and capital. They listened attentively and said they left with "empty hands" in regard to the proposal and possible feasibility of it.
Part of the result of these meetings was reflected in the sharp fall in Argentine global bonds on Thursday and Friday: around 10%, in what was a return to the prices of the days after the August 2019 PASS.
Experts say that prices fell to a level that is close to the dreaded "vulture funds" , which are characterized by buying very cheap and then litigating.
Debt negotiation enters the definition zone. Guzmán keeps the proposal under four keys (only he and the President handle it) and the bondholders let it go beyond that they are willing to accept removals and postponements in exchange for the coupon of the new bonds does not fall below 6% per year. Will they quickly reach an agreement?
The Government's strategy is to rely on an agreement with the IMF to apply an "aggressive" take off to private holders of securities with the objective of clearing "at once" the financial horizon of the next four years.
Both Alberto Fernández and Guzmán say they are against the plans that close in the Excel spreadsheets and not in the practice of daily politics. But the numbers start to get strong.
Tax collection has been growing below inflation and some key taxes such as VAT, tied to consumption, do not react. That adds to the possible "coronavirus effect" for Argentine exports to the world and the return of a conflict over higher taxes with the field that once again cast doubt on Argentina's ability to generate the dollars needed to pay the debt.
The government's conflict with the countryside brings to the present ghosts that were believed to be overcome. The unhappy phrase "we will see each other on the routes" of the statement of Argentine Rural Confederations on Thursday, followed by another not better attributed to Alberto Fernández: "We already negotiated. But they want to always win" , to cut off the talks. The balance: Kirchnerism celebrates and uncertainty about the economy's takeoff multiplies.
It took a few hours for the senator and head of the Homeland Institute, Oscar Parrilli , to come out to declare that he was proud that the entities of the field were the first to "attack" them, calling to refresh the conflict of March 2008 by resolution 125 which established a system of mobile withholdings for agricultural exports.
An escalation of the conflict between the Government and agricultural producers does not suit any actor in an economy that has been stagnant for eight years and has not found a way out. Unless political voracity prevails.
The Government gave absolute priority to the negotiation of the debt in the understanding that, once it was known how much the country should pay in the coming years, it could make a credible economic plan.
Times shortened rapidly. The world markets collapsed and in the midst of that storm Guzman should announce the proposal. The operators were already chinstrapped and the belts were adjusted.