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Harsh criticism from bondholders who entered the swap: they warn about the deepening of the crisis and demand that the IMF intervene

2020-10-22T20:10:31.615Z


They denounce that Argentina is heading to default on the restructured debt and criticize the economic course.


10/22/2020 4:40 PM

  • Clarín.com

  • Economy

Updated 10/22/2020 4:40 PM

A group of bondholders who agreed to enter the debt swap closed at the end of August this afternoon expressed 

very harsh criticism of

the government of Alberto Fernández and the economic decisions it adopted after the closing of that operation, in which it achieved a

99%

adhesion

of creditors.

The Ad Hoc group, which had in its portfolio

Par and Discount

bonds

from the 2005 and 2010 swaps, was made up of the Monarch and VR Capital funds, among others, and in the statement they unleash harsh criticism, and imply that the Government is showing that It has no interest in honoring even the debt arising from the restructuring of liabilities, which allowed Argentina to reduce payments by more than

37,000 million dollars during the next few years.

The bondholders, who delivered bonds that accrued coupons of up to 8.25% annual interest to receive in exchange bonds that accrue from 2 to 4% interest, in addition to accepting grace periods of three years,

expressed their harsh complaints

, among them, that the Government of Alberto Fernández can no longer use the excuse that it inherited a heavy inheritance.

And they demand that Argentina and the IMF do their part, to straighten out this situation.

The most salient points of the statement are these:

- Creditors rallied to provide $ 37 billion in cash flow relief and accepted a large loss in value to

pave the country's path to recovery from a deep recession and the Covid-19 pandemic.

- Argentina insisted on negotiating the restructuring of its commercial debt

before drawing up a detailed economic plan

and negotiating a new IMF program.

Bondholders asked many times during restructuring discussions about the specificity of an economic program and expressed concern about what would happen the day after the stock market closed.

In response, Minister Guzmán

assiduously refused

to provide specific parameters of an economic agenda to creditors, simply insisting that fiscal sustainability and rebuilding international reserves were his firm goals.

Argentina's economic authorities have not only failed to restore confidence, but the political measures taken immediately after the debt restructuring

have dramatically worsened the country's economic crisis.

The Central Bank has reinforced an exchange rate policy that promotes imports, discourages exports, and has depleted reserves to a dangerous level.

The resulting gap of more than 100% between the official exchange rate and the parallel virtually guarantees that reserves cannot be rebuilt,

a classic case of unsound money expelling solid money.

Steps taken to force otherwise creditworthy Argentine borrowers to restructure their debts have undermined basic confidence in the inviolability of contracts.

By conveying the message

that even sustainable debts will not be repaid

, the Argentine authorities have alarmed many creditors, who wonder if their sacrifices to provide a debt structure that Argentina is capable of servicing were essentially negligible vis-à-vis a borrower who simply

may not be willing to pay.

Macroeconomic stability appears to be

a continually receding mirage

.

The fiscal and monetary demands of 2020 are perhaps understandable, but it is clear that the intention to have a primary deficit of 4.5% and an overall deficit of 6% in 2021, financed with the printing of pesos, is so damaging to internal confidence and external enough to predict disaster With no apparent political anchors and an apparent unwillingness to make tough decisions, Argentina's economic policymaking undermines the post-Covid recovery.

As a result, Eurobond prices are lower than after the PASO elections last year.

Rather than herald a reopening of market access to support Argentina's manifest investment needs,

the aftermath of the debt restructuring is a virtual wasteland for Argentine credit.

It is no longer plausible that the Argentine government blames its problems on the economic legacy it inherited.

After almost a year in office, the Argentine government has yet to offer a coherent and sustainable economic vision to Argentine society and the markets.

Look also

The IMF confirmed that the Government is preparing a plan to obtain the support of the agency

For the economist most consulted by businessmen, "devaluation must be avoided at all costs, the challenge is to build trust"

Source: clarin

All business articles on 2020-10-22

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