Argentina opens talks with IMF for credit line

Argentina opens talks with IMF for credit line

08/05/18 - 12:41 - Peso plunges more than 5 per cent to new low as sell-off resumes

Argentina’s President Mauricio Macri announced that he has begun conversations with the International Monetary Fund to secure a line of credit amid a fresh sell-off in the country’s currency, debt and equity markets.

“We are going to start today to secure greater support to confront the new international scenario and avoid a crisis,” said Mr Macri in a pre-recorded message from the Casa Rosada presidential palace, pointing to devaluations in currencies across emerging markets.

The Argentine peso had plunged more than 5 per cent to a record low of 23.08 against the dollar on Tuesday, taking its decline in the last eight trading days to 12 per cent in spite of Argentina’s central bank spending $5bn in reserves and raising interest rates to 40 per cent.

The Macri government’s approach to the IMF gave a reprieve for the beleaguered peso, allowing the currency to recover briefly to 22.30.

The country’s sovereign debt also rallied, with the 100-year bond coming off its session low of 84.37 cents on the dollar to trade at 85.75 cents.

Defending his “gradualist” economic strategy to rebalance the “disastrous” inheritance from the previous administration, which he accused of “demagoguery and lies”, Mr Macri argued it was the only way to end years of stagnation. “The problem that we have today is that we are one of the countries in the world that most depends on external finance, as a result of the enormous public spending that we inherited and are restoring order to,” he said, pointing out that the first two years of his administration were helped by a “very favourable” international context.

The peso’s 5 per cent fall had resembled a loss of confidence from foreign investors along with some form of “capitulation” by domestic investors, said Simon Quijano-Evans, EM strategist at Legal & General Asset Management.

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