Creditors blast Argentina for post-restructuring bond blow-up

Two of Argentina’s largest creditor groups excoriated the government for mismanaging the economy, saying the country was headed for disaster just seven weeks after restructuring US$65 billion in debt.

The investors urged policy makers and the International Monetary Fund to do their part to set the stage for an economic recovery. They said in a joint statement that the government’s foreign-exchange policy was curbing exports and making it difficult to build foreign reserves.

“Instead of heralding a re-opening of access to markets to support Argentina’s manifest investment needs, the aftermath of the debt restructuring is a virtual wasteland for Argentine credit,” members of the Argentina Exchange Bondholders group and the Argentina Creditor Committee wrote. “Creditors have already played their part, providing a historic opportunity to Argentina for a fresh start. It is now up to Argentina and the IMF to play theirs.”

Gross domestic product is poised to contract almost 12 percent this year, its worst one-year decline on record. Inflation is running at more than 35 percent, and the unemployment rate is the highest in more than a decade.

The creditors said that Argentina’s money printing to pay for fiscal spending has damaged investor confidence at home and abroad, and that its policies were exacerbating the economic toll of the pandemic.

Since the restructuring, Argentina has tightened restrictions to keep companies from using dollars to pay debt, raised taxes on dollar purchases for savers, increased some local interest rates and cut levies on agriculture exports. Still, the central bank is bleeding dollars and profligate spending means the country is running the highest deficit in at least three decades.

The country’s bonds have fallen more than 25 percent since they were issued at the beginning of September, and Morgan Stanely has called it the worst rout in the aftermath of a restructuring in at least 20 years.

That said, the creditor groups have no specific leverage they can use to extract policy changes from the government. Argentina has no payments on the restructured debt before 2023, so there’s no risk of default over the next couple of years.

Even after Argentina won about US$38 billion in debt relief in the restructuring, foreign reserves have dipped to a four-year low and the gap between the official and unofficial foreign exchange rates is at its widest in over 30 years. President Alberto Fernandez has said he has no plans to devalue the currency.

The Economy Ministry’s press office didn’t immediately reply to a request for comment.