MercoPress. South Atlantic News Agency

Bondholders criticize Argentina erratic economic policies, subordinated to politics

The Exchange bondholder group claimed it was concerned talks with the IMF over a new deal were being “subordinated to politics.”

Creditors have criticized the current Argentine government of the country for what it describes as “erratic” economic policies claiming they are impeding growth and weighing on bond prices five months after the government restructured some US$ 65 billion in foreign bonds.

The Exchange bondholder group, involved in the restructuring that helped overcome Argentina's ninth sovereign default, added it was concerned talks with the International Monetary Fund over a new deal were being “subordinated to politics.”

“An IMF program is the only likely source of policy anchors and a credible medium-term framework that can bring stability,” it said. “However, the government appears to be seriously contemplating delaying an agreement with the IMF in order to have the freedom to continue its unsustainable policies.”

Argentina is currently in talks over a new IMF program to replace a failed facility from 2018, from which the country has already received some US$ 44 billion it cannot repay. That deal is seen as key to bolstering the country's economic position.

The government has said that it wants to strike a deal by May, a target that the IMF says is ambitious though feasible. However, creditors and analysts say there is growing pressure from within the ruling Peronist coalition, and particularly their strong leader, Cristina Kirchner, to delay the deal until after mid-term elections in October.

The Exchange group cited policies including price freezes, grains market interventions, capital controls and a onetime tax on the wealthy, as issues that were “short-term palliatives that are bound to fail and only store up greater problems down the road.”

There is also a growing number of major international companies that are leaving Argentina while many members of the entrepreneur group are moving to neighboring Uruguay, which although an insignificant market, it is implementing entirely opposite policies to attract qualified migration and investments, with lower taxes and other facilities.

“Erratic, ad hoc policymaking amid a growing list of policy mistakes and u-turns ... all erode confidence,” underlined the Exchange group.