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Montevideo, October 23rd 2018 - 20:38 UTC

Argentina seems to have managed Tuesday's challenge, but what comes next?

Wednesday, May 16th 2018 - 09:09 UTC
Full article 13 comments
 Finance minister Luis Caputo said Argentina managed to float additional bonds, equivalent to US$ 3 billion in Pesos Finance minister Luis Caputo said Argentina managed to float additional bonds, equivalent to US$ 3 billion in Pesos
The Argentine currency since the beginning of the year has lost 12.63% of its value against the greenback, and Central bank reserves eroded by almost US$ 10bn  The Argentine currency since the beginning of the year has lost 12.63% of its value against the greenback, and Central bank reserves eroded by almost US$ 10bn

Argentina’s central bank on Tuesday rolled over billions of dollars in short-term debt, providing President Mauricio Macri’s government with a shot of confidence after weeks of economic volatility. In a statement, the Argentine central bank said it refinanced all of the US$ 26 billion of peso-denominated short term bonds that matured on Tuesday. Investors were attracted by renewal rates of 40% for 36-day Lebac and 38% and 38,5% for 90 days and plus, Lebacs.

Finance minister Luis Caputo also informed that Argentina managed to float additional bonds, equivalent to US$ 3 billion in Pesos, at 20% interest for five-year papers and 19% for eight years papers.

This also helped to absorb liquidity from the market, taking pressure from the Peso which traded 3.61% stronger against the US dollar at 24.63 Pesos.

The Argentine currency since the beginning of the year has lost 12.63% of its value against the greenback, while the Central bank has seen international reserves erode by almost US$ 10bn.

The Argentine government thus seems to have managed to contain the rush from the Peso to the dollar, while it negotiates a stand-by credit from the IMF, estimated in US$ 30bn, according to local media, plus support from other multilateral organizations.

However market analysts argue that the situation still remains potentially volatile, despite the fact it has managed to roll over 25bn dollars in short term bonds taking pressure from the bashed Argentine Peso.

In effect it yet has to see how the Peso loss of purchasing value will impact on prices and overall inflation, and economic activity, although it should be a boost for the export industries, even when bad weather has created a great loss for the soybean crop.

This is particularly serious since on Tuesday the stats office Indec released the consumers price index for April which climbed to 2.7%, accumulating 9.6% in four months when the government's target for the twelve months is 15%, the index on which hopefully labor contracts were to be agreed.

Likewise another question is what conditions the IMF could demand from Argentina for the stand-by loan, particularly referred to balancing the budget, which now stands at 7% of GDP.
IMF has repeatedly said it supports the Macri administration approach to economic policy which is based on gradualism, contrary to the shock experiences of the past.

Therefore many uncertainties remain regarding inflation and how to try and work towards a more balanced budget, without affecting the level of activity and much needed capital investment, to help with jobs and update infrastructure.

Categories: Economy, Politics, Argentina.

Top Comments

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  • bushpilot

    “and you would like me to keep quiet about it just because I happen to live elsewhere?”

    But you keep very quiet about the 32 million Venezuelans who've been brutally affected by Bolivarian economics while you live elsewhere.

    Why? Why exactly haven't you said one word about their suffering? If you care about the suffering of so many, why not so much as a peep about the Venezuelans?

    Venezuela is a Latin American country and was an important socialist partner to the CFK administration.

    You don't care about people suffering so much as you care about socialism. Otherwise you'd have cried about the socialist economic disaster in Venezuela at least a bit instead of not once.

    Many in Argentina will be affected by what is happening there. They are going to be shackled terribly by debt payments again.

    But that quote by Voice, which you love as a pearl,

    “None of this affects you”,

    is absolutely correct. You live in Canada.

    When was the last time you went back to Argentina because you care soooooooo much about Argentines?


    Argentines just want to print money or borrow money. Not enough people there want their money by working for it, same in the U.S. They just want that free Universal Basic Income you think is such a good idea.

    That's why a pile of their money just isn't worth anything.

    You should be crying also in support of free enterprise if you want Argentina to prosper.

    Hold on to your hats everybody, and grab an umbrella.

    May 17th, 2018 - 06:33 pm +2
  • Voice

    Enrique...

    It is an accomplishment...what do you think they should have done...defaulted?
    Also how else would they have attracted investors short term, if not by attractive renewal rates?
    There was probably little else they could have done...
    Would you have been happier if the country had defaulted so that it would prove you right about the Govt...?
    None of this affects you at all, so why all the criticism...?
    ...and I don't remember the country booming with the previous Govt...
    The decline has been over decades so I imagine it will take decades to rectify that...
    There is no short term remedy or prosperity for Argentina...

    May 16th, 2018 - 10:40 pm +1
  • Voice

    “Oh come on. What a bland, pitiful posting you have penned here. Read it again please:

    “I don't remember the country booming with the previous Govt...”

    Listen up, Voice. Nestor Kirchner received a country fresh off its worst economic crisis in 2003. He did not talk about the “heavy inheritance.” He just set up to work for his country.”

    You read it again and listen up... Nestor Kirchner was not the previous Govt, his presidency ended in 2007...
    More than a decade ago...
    If you are going to quote facts...make sure they are relevant...
    Now... tell me about the boom of the previous govt...

    May 17th, 2018 - 06:47 pm +1
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