Opposition candidate, Alberto Fernandez, said that Argentina would struggle under present conditions to repay a loan to the International Monetary Fund and he would seek to renegotiate the repayment terms, according to an interview published on Sunday by the newspaper Clarin.
“I would say that there is only one incontrovertible reality and that is that Argentina in these conditions is not able to repay the debts it took on,” said Fernandez, the favorite to win the October elections.
“I have no problem helping the president (Mauricio Macri) to renegotiate in the way that I propose but do have a lot of trouble with is having to explain to the Fund the failings of the president. That the president will have to do,” he added.
Argentina under Macri signed a stand-by agreement with the IMF in mid-2018 for US$57 billion, pledging in return to implement a significant fiscal adjustment, a pact Fernandez described as “harmful.”
Fernandez, who last week drubbed Macri in primary elections, said that without the IMF deal the country would have defaulted on its repayments, but added that the relationship with the financial institution had to be one of “respect” not “submission.”
The Sunday interview in Clarin sends a strong message since the mentor of Fernandez, and the vote collector, is ex president Cristina Fernandez, who during her eight years in office targeted the Buenos Aires daily as its number ONE enemy and even tried to force the powerful media group to split. Alberto Fernandez instead has had a civilized relation with the Clarin group.
“We have to understand that we are virtually in default conditions now and that is why Argentine bonds are worth what they are worth, because the world knows that they cannot be paid,” he told Clarin. “We must act sensibly, and it is sensible that Argentina must fulfill its obligations.”
Argentine markets collapsed in the week after Fernandez, who has former center-left ex-president Cristina Fernandez de Kirchner as his running mate, came in around 15 points ahead of Macri in the primaries, a result that leaves him in a strong position to win the October election without a second round.
Argentina, Latin America’s third-largest economy, is struggling with economic turmoil that saw the peso currency tumble against the dollar and annual inflation climb above 50%. The peso ended the week 17.58% weaker, going from 45.33 pesos per dollar before the elections to 55 pesos on Friday, despite intervention by the central bank.
Alberto Fernandez, who during the campaign said that the dollar was being held at a “fictitious” value, urged Macri in the Clarin interview to heed the call of the central bank to safeguard its international reserves.
“Even if on Monday they had laid down all of the country’s reserves, they still would not have held back the price of the dollar,” he added.
Fernandez, a former cabinet chief during the administration of former President Néstor Kirchner (2003-2007), said he believed that with dollar at 57 pesos was a reasonable price, and added inflation would close the year up more than 50%.
“If I finish my term and have inflation down to a single digit, I will be very happy. That’s four years of hard work,” he said.
Fernandez said his aim, if he wins the election, will be to reboot Argentina´s economy and bolster exports to earn dollars to pay back its debts. He said he would also seek to negotiate with those holding Argentine bonds.
“I will do everything necessary to ensure we can export because that way Argentina will produce dollars,” he said. “There is no other way. Meanwhile I will speak to our creditors to see if we can come to an arrangement. We must sit down and speak, one to one, as we did with the debt at one time,” he said, referring to the debt restructuring he negotiated when he served as cabinet chief in 2005.
Fernandez rejected a suggestion by Brazilian President Jair Bolsonaro that, if elected, he would shut down the economy. Bolsonaro said Brazil would consider leaving the Mercosur economic bloc if problems arise with Argentina in the event of an opposition victory and the economy shutting down. China and Brazil are Argentina's main trade partners, and Mercosur absorbs most of Argentine industrial production.
“Bolsonaro must relax, I do not plan to shut down the economy. It´s silly,” Fernandez told La Nacion newspaper.