Thursday, March 30, 2023

ECONOMY | 15-02-2020 09:34

Markets, economists react badly to Guzmán’s debt comments

Economy minister’s address to Congress pitched to local audience.

Markets and leading economists reacted negatively to comments from Martín Guzmán this week, after the economy minister told Congress he wouldn’t let foreign invesment funds decide Argentina’s macroeconomic policy.

Speaking before lawmakers in the lower house Chamber of Deputies on Wednesday evening, Guzmán delivered comments on Argentina’s debt burden and solvency. Declaring that Argentina was “experiencing a deep economic and social crisis,” the minister railed against the nation’s “unsustainable debt burden” and warned a “deep debt restructuring” process lie ahead.

“In the last two years, 465,000 Argentines have entered into poverty. Poverty has increased from 2017 to 2019 from 28.6 percent to 35.4 percent and continues to escalate,” he warned.

Guzmán argued that countries facing such a crisis do not improve without economic growth, emphasising that Argentina must “break a dynamic of recession” in order to pay off its debt.

Hinting that the nation’s creditors could face a haircut, he acknowledged that talks to restructure the debt would “frustrate” bondholders.

“There’s a lot of talk about whether the proposal to bondholders will be friendly or aggressive,” he added. “Neither the proposal nor the focus are friendly or aggressive – the focus is on sustainability.”

According to economist Luis Palma Cané, the comments were “a clear and obvious signal that we are going to default,” pointing to Guzmán’s declaration that there would be no fiscal surplus until 2023 at the earliest. Argentina ““will not pay anything at all” until then, said the economist.

Ex-presidential candidate and economist José Luis Espert described the speech as “not really serious,” describing it as “pathetic and disrespectful.”

Markets also reacted negatively, with the Buenos Aires Stock Exchange falling by 3.2 percent on Thursday and Argentina’s country risk rating jumping almost five percent to 2,055 points.

Economist Gustavo Ber said Guzmán’s remarks on debt restructuring had “aroused fears among investors.”

Opposition lawmakers in Juntos por el Cambio coalition, who recently backed the government legislation granting the Executive powers to restructure the debt, accused the Fernández administration of having no economic plan.

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