Argentine President Alberto Fernandez on Monday night confirmed that the national government had no plan to bail out Buenos Aires province, which has a payment due later this month on hard-currency provincial debt.
In an interview with the C5N television channel, Fernandez said no provision had been made for such a move in the country´s budget.
This is the strictest reality, Fernandez said. We have to be patient; we are aware of the problem.
The only culprits are those who destroyed the economy of the Province of Buenos Aires, he added, in a swipe at the previous administration.
Provincial bonds maturing this year and through 2027 fell between one and 10 points on Monday, with the January 2021 maturity AR058449334=, tied to a more than US$ 250 million amortization payment due in two weeks, down six points at 60 cents according to Refinitiv data.
The drop came after Economy Minister Martin Guzman told local newspaper Clarin in an interview published on Sunday that the national government was not considering a financial bailout, something that had been reported locally.
Roger Horn, emerging markets desk analyst at SMBC Nikko Securities America said the comments could affect the government's wider negotiations for the restructuring of about US$100 billion in debt.
I had thought the provinces would piggyback on whatever the sovereign does in terms of restructuring, but now my concern is that they default ahead of the sovereign or they rush to do a restructuring. If it is a very negative restructuring, then that would have a negative effect on the sovereign debt restructuring, he said.
Buenos Aires province, Argentina's largest, said last week it was seeking talks for temporary financial relief with holders of its 10.875% bond due in 2021.
What we've heard from the federal government suggests there's quite a bit of willingness to negotiate its debt in good faith, but there's willingness and there's capacity, and even if the willingness is there, Argentina is in a very difficult spot,” said Todd Martinez, director of Latin America sovereigns at Fitch.
Argentina has been grappling with a pervasive debt crisis since 2018. Conservative former President Mauricio Macri was defeated by center-left Fernandez on Oct. 27.
The Fernandez administration, which took office on Dec. 10, is in talks with bondholders and other creditors including the International Monetary Fund. At the weekend, Fernandez set a March 31 deadline to renegotiate Argentina's public debt.