Argentina bondholders accuse government of undermining recovery
Colby Smith in New York and Benedict Mander in Buenos Aires
Some of Argentina’s biggest bondholders issued a sharp rebuke of how the government is handling the country’s deteriorating economic situation, just a few months after reaching a compromise to restructure $65bn worth of debt.
Two creditor groups at the heart of the recent negotiations to resolve Argentina’s unsustainable debt burden accused the government of putting forward policies that “undermine” its own economic recovery, in a statement released on Thursday.
They also called into question whether “their sacrifices to provide a debt structure Argentina is capable of servicing were essentially meaningless”.
“Argentina’s economic authorities have not only failed to restore confidence, but policy actions taken in the immediate aftermath of the debt restructuring have dramatically worsened the country’s economic crisis,” wrote members of the group, representing holders of previously restructured exchange bonds as well as the Argentina creditor committee.
They added: “Instead of heralding a reopening of access to markets to support Argentina’s manifest investment needs, the aftermath of the debt restructuring is a virtual wasteland for Argentine credit.”
Argentine bond prices have sunk back into distressed territory since the restructuring process was finalised in early September. The deal involved Argentina pushing back the timing of large debt payments and slashing the aggregate amount set to be paid out to creditors.
The country’s bond set to mature in 2030 has slipped to 38 cents on the dollar, having debuted above 50. Another approximately $20bn in bonds maturing in 2035 have since plunged to 34 cents on the dollar.
Meanwhile, the peso has slumped after already-strict capital controls were tightened last month. So far government measures aimed at protecting net liquid foreign exchange reserves, which have fallen below $1bn, have failed to convince investors, as the central bank continues to resort to massive money printing to finance spending.
The gap between the official and black market exchange rates has reached historic highs, with many fearing that the country’s seventh devaluation since Argentina’s peso abandoned its peg to the dollar in 2002 is imminent. On the black market a dollar can now fetch as much as 190 pesos.
The statement from creditors came on the heels of the IMF’s most recent visit to Buenos Aires earlier this month. The fund lent Argentina $44bn as part of a record $57bn bailout package extended in 2018, and policymakers are now looking to renegotiate the repayment plans.
“This vicious cycle needs to be broken,” the investors said. “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.”