Argentina wants debt renegotiation

The cartoon appeared in the Argentine newspaper “Página 12” on 26 April 2020. The text at the bottom right is translated: “And when will there be a vaccine?” The viral plague of the Argentine economy: The investment fund and capital companies mentioned here, all of them very large, belong to the Committee of Private Creditors of Argentine Public Debt (ACC), which rejected the government’s offer to reschedule debt as insufficient. (picture “Página 12”)

gl. Once again, Argentina is on the verge of national bankruptcy. On 22 April 2020, 503 million USD were due and the country was unable to pay them. Even before the corona crisis, Argentina’s foreign debt at the end of 2019 was around 280 billion USD, or 92% of GDP.
During its four-year term since 2015, the neoliberal government of Mauricio Macri had increased the debt by around 100 billion US dollars. The IMF has also granted Argentina the largest loan ever granted to a country: 57 billion US dollars. However, instead of investments, only speculative capital came into the country, benefiting from extremely high interest rates of over 70%. During this period, the population became impoverished once again and unemployment rose sharply.
Following the outbreak of the corona epidemic, the left-liberal government of Alberto Fernández, who has been in office since mid-December last year, set up an aid programme worth some USD 10 billion. It is intended to finance investments in infrastructure, cheap business loans, an increase in child benefits for poor families and an increase in the minimum pension. The 700 billion pesos printed by the central bank in March increased the money supply by around 35% in one month.
On 17 April the government presented foreign creditors with a proposal to restructure the debt, which for the first time is also strongly supported by the IMF. Being one of Argentina’s largest creditors, the IMF also has an interest in receiving at least part of the loan. The government’s proposal provides for a very low debt cut of 5.4%, but in return for a drastic interest rate cut of 62% (the average interest rate is to be 2.33%) and a grace period of 3 years. The terms of the bonds are also to be extended. Creditors will have 20 days to comment.
Already on the following day, various investors criticised the proposal, demanding a correction. The Argentine government is therefore now planning to introduce a special wealth tax for rich people with assets of more than 3 million USD, which is intended to raise between 2.3 and 3.8 billion USD to finance measures against the corona crisis. •

Sources: Neues Deutschland from 14 April 2020,
Página 12 from 17 and 18 April 2020,
amerika21 from 3 February 2020

10-point programme for the economic transition

by Alfredo Serrano Mancilla, Guillermo Oglietti and Nicolás Oliva

gl. In the Argentinean newspaper Página 12, in view of the economic crisis, a proposal is presented on how to strengthen the economy of Argentina (and other Latin American countries).

In order to strengthen the economy in Latin America in the face of the pandemic, public health, wage and income policy (wages and transfers), financial policy (the role of state-owned banks and stronger and better lending to SMEs) and regulatory policy (regulation of prices and monopolies) are as urgent as necessary. They are being pursued with varying degrees of emphasis by all countries in the region and are not yet sufficient to prepare the Latin American economy for the future challenge of recovery.
The aim of this decalogue is to point out the main economic policy measures needed to cope with the consequences of the COVID-19 pandemic, complementing those already in place. We cannot afford to stand idly by on macroeconomic issues in this “interim period”. We must therefore take immediate measures that will have a mitigating and cushioning effect and that will protect us from hostile behaviour that may arise in this context. At the same time, they should serve as a basis for strengthening the Latin American economies in the face of major challenges.

Here are the 10 proposals:

Cancellation of Latin American and Caribbean external debt to multilateral organisations and rescheduling of debt to private creditors with a two-year extension.
Partial suspension of profit remittances, capital controls to prevent currency outflows.
New quota policy and regulation of imports of luxury goods for the next six months.
Regulation of the bond markets to prevent speculation and usurious profits.
A fixed exchange rate regime that immunises economies against speculative capital movements, strengthens domestic currencies and avoids major devaluation shocks.
Ban on the credit default swaps (CDS) market for six months.
Suspension of all chapters of the TRIPS (Trade Law and Intellectual Property Rights) treaties relating to health and pharmaceuticals for one year.
Creation of a solidarity tax on assets in excess of USD 500,000.
Call for the issue of Special Drawing Rights to the International Monetary Fund, to be distributed among countries according to the severity of the economic crisis and to remain in force until countries return to GDP growth.
In the financial system, setting a maximum difference between asset and liability interest rates of 5 per cent for six months.

The old neoliberal Washington consensus has failed in countless places and on countless occasions. In face of that, it is time to find alternative approaches to avoid another failure, both in managing the pandemic and in economic recovery.

Source: Página 12 from 26 April 2020

(Translation Current Concerns)