03/09/2020 - 18:24
Monday started with the news of a 30% drop in the price of oil as a result of Saudi Arabia and Russia had not agreed and Riyadh announced a sharp increase in production to face the decline in economic activity in China as a consequence of the coronavirus.
It may seem far away but the confluence of coronavirus and sharp decline in oil led to a shock with market collapse (Wall Street ended up falling 6.7% while the Merval porteño did 12.38%) and that added to the fall vertical oil (a barrel of US $ 45 to US $ 31.5) and grains, especially corn and soybeans.
The result of the black Monday, which reminds us of the fall due to the crisis in US mortgages in 2008, finds Argentina at a particularly delicate moment both because of the negotiation on the public debt and the need to start the economy.
- The neighbors devalue and the Central Bank had to sell US $ 100 million to contain the dollar . Since the beginning of the year the Brazilian real had a rise of the order of 20% while the Central Bank slowed the depreciation of the peso in the attempt to moderate inflation.
- The problem now is that with the official dollar quite still (the parallel closed at $ 79.50 and the one with liquidation at $ 85) and raising the retention of soybeans by three points, the attempt to increase exports finds serious resistance in the reality.
- Martín Guzmán has a complicated negotiation framework . Argentine bonds had fallen sharply on Thursday and Friday and the market attributed it to the bondholders who met with the Minister of Economy were not satisfied with the outcome of the talks.
- The fall of the bonds, an additional problem for Guzmán . Public titles fell between 1.5% and 8% and were put to the vulture funds. Experts argue that if an Argentine bond trades below 30 parity, it enters the risk zone because the "vultures" do not negotiate but wait and litigate.
- So far the bonds exceeded 40% parity and, therefore, Minister Guzmán had the opportunity to negotiate with institutional funds (Pimpco, BlackRock, Fidelity, etc.) that are more interested in negotiating, to achieve an acceptable rate in the new bonds that are issued, which in charge at all costs. Among other things because they know that Argentina lost ability to pay.
- Will it be convenient for the Government to lower rates worldwide so that creditors accept a more aggressive debt relief? Opinions among economists are divided but they emphasize that Argentina has not yet made its proposal and will now do so in a clearly worse financial climate.
- The flight of capitals to quality further weakens the interest rate in the United States. In the Argentina of the stocks, the outflow of dollars may moderate but the entry will be very difficult.
- Concern for the future of Vaca Muerta multiplied. The production of unconventional oil and gas from the Neuquino field was already declining due to the lack of government definitions regarding reference prices. With the fall of the barrel to US $ 31 worldwide, the chances of an increase in production decreased significantly. The much-announced plan to "shield" Dead Cow so far did not come.
- The core of the Argentine economic problem is sharpening. The fall of the markets complicates the possibility of increasing exports for all emerging countries and Argentina will not be left out.