In the midst of a series of structural economic problems, the crisis in Argentina can win a new chapter later this month.
The country’s government is trying to renew debt bonds due in June to avoid a default in the domestic market.
The scenario, however, is not the most favorable, amid a highly volatile external financial environment and a flight of investors in search of less risky markets.
The result has already started to appear. On Monday (13), the dollar oficial reached the biggest daily variation in two months in relation to the Argentinian peso and set a new record, surpassing US$ 122.
Investors are also eyeing the risk of default and the next steps in the relationship with the International Monetary Fund (IMF ), a relevant creditor whose agreement with Argentina and its possible revision may give a breather to the complex scenario of the country, which faces high levels of inflation and unemployment.
Debts of $5 billion mature: default risk
Juan Frers Allan, a professor at the University of Buenos Aires, says that Argentina faces a combination of external and internal negative factors for the country.
“Internationally, there is the issue of the war in Ukraine, problems in Europe. Specifically in Argentina, the dollar has been rising a lot, and for at least 10 years consecutively. The Argentine people do not believe in their own currency, and this is because everyone uses the dollar to protect money and invest,” he says.
As foreign investors leave the country in search of the safety of more stable markets — such as the United States and the Federal Reserve’s rate hike cycle — Argentina is grappling with high country risk due to the chance that President Alberto Fernández’s government will not be able to pay your debts
For Allan, the scenario began to affect the demand for Argentine bonds, whose values are falling, which increases the chances of leading to a default situation due to lack of capital.
Leonardo Trevisan, professor at ESPM, believes that it is indisputable that external factors weigh on capital outflows, especially with the worsening market expectations for the global economy.
But, according to the expert, other causes are added to the case of Argentina.
“Argentina lives on chronicles of announced crises. At the end of the month, a revolving loan in pesos of approximately 600 billion pesos expires, which in practice means US$ 5 billion, and it is a great test of whether the Argentine crisis has actually reached the domestic bond market”.
He says that the Argentine government is struggling with the country’s banks, which are seeking a significant interest rate increase to earn more from the rollover of debt, which is even more difficult due to the government’s “extreme fragility” with the market. external.
A possible default on the domestic debt would not be new, and it happened recently, in the government of former president Mauricio Macri, but it is an indication, according to experts heard by CNN, that little has changed with the current president, Alberto Fernandez, despite being ideologically governments. distinct.
“The chance of a default leads to flight from the country, seeking safety. This flight is traditional in Argentina, with a lack of dollars. Argentine agribusiness, the major exporter, stocks the dollar outside the country, this is the point, because it takes away the government’s room for maneuver to force the return of the currency to the market,” he explains.
Fernando Ferrari Filho, a professor at UFRGS, considers that the country’s problem is chronic, regardless of the government’s bias, and is linked to a situation of “chronic deindustrialization, dependence on commodities, especially wheat, and it is an endogenous issue, the very dynamics of the economy leads to this”.
The professor cites a picture of recession, inflation above 40% in the 12-month period and rising levels of unemployment, which add to the negative global scenario.
“The government would have a debt renegotiation, which it should honor in 2021 and 2022, but cannot honor it, reserves are low, around US$ 30 billion, US$ 40 billion, short-term debt exceeds reserves”, says.
The country’s effort to restructure the composition of the debt by attracting international investors ended up failing due to bad timing.
“How are you going to contribute resources if you have recession, inflation, growing poverty, if there is no perspective to reverse this context? If it doesn’t, it creates a vicious cycle”, he points out.
Agreement with the IMF
Trevisan points out that Argentine Economy Minister Martín Guzmán has denied that the country is going to default on its debt.
On Sunday (12), the minister said on Twitter that “as for the barbarity of defaulting on debt in pesos: our government would never do that. Credit in one’s own currency is a pillar of the sovereign state”.
For the minister, the chance of default occurring or not will depend much more on the IMF’s actions than on any government measure.
Filho, from UFRGS, assesses that a moratorium may occur, but that the IMF has indicated a change of understanding in recent years, reviewing more orthodox positions and facilitating a debt renegotiation, since the organization and the government previously reached a restructuring agreement currently in effect.
On Thursday (9), the IMF announced that it had revised the quarterly targets that Argentina would need to meet under this agreement, which involves reducing inflation, cutting subsidies and increasing central bank reserves.
“The capital outflow is more due to external factors. If the IMF really becomes aware of the situation, if a renegotiation actually takes place, it is not a reason for capital to flee, on the contrary, it is a guarantee indicating debt restructuring”, he evaluates.
Allan, on the other hand, believes that a possible agreement is hampered by the current economic situation in Argentina, and that “the government’s current policies are not being assertive. Inflation continues to rise, spending is out of control, the situation is not likely to be good in the near future.”
For Trevisan, “the dollar will rise further, for sure. The IMF also knows this. The economy is semi-dollarized, and inflation follows a lot, so the inflationary picture will get worse, especially if there is a default”.
Source: CNN Brasil
