Yesterday, addressing the Lower Chamber, criticized the way in which previous debt restructuring processes took place, saying the Government has an integral macroeconomic program. Out of which all measures that have been taken since the new administration took office emanate.
In this plan, fiscal and monetary measures are aligned, to which price agreements are attached, having the State as coordinator. This could be confirming investor fears that the Minister would be willing to start negotiations with bondholders without disclosing details of an articulated economic plan.
He also criticized the usual response to a debt burden by reducing public expenditure, while the private sector also adapts to this uncertainty. So, he claims that in order to end this negative dynamic, ‘we need to ease de debt burden’, who described the problem as ‘not a liquidity crisis, but something deeper’.
Regarding the investor community, ‘the stance will not be amicable neither aggressive, should be sustainable and on a good faith basis’ Proof of Argentina’s good faith policy is avoiding entering into foreign debt default by earmarking Central Bank reserves. However, ‘a stance that may not last long’.
Regarding Fiscal Policy, Guzmán disclosed that fiscal deficit reduction in 2020 is not sustainable and that it should be the needed space for fiscal expansive policies that should lead to economic rebound. This could imply that any such fiscal compromise would arise following the debt restructuring, when creditors have lost negotiating power.
As of 2021, Guzman described three possible paths:
If no measures are taken, primary balance would be met in 2026
The ‘most realistic scenario’ is that of reaching primary equilibrium in 2023 with a primary surplus of 0.6 to 0.8% of GDP for 2026
The reversal of the 2017 fiscal reform would result in primary balance in 2022, a 1% primary surplus in 2026 and a 1.2% long term primary surplus.
Regarding coupon rates, Argentine average is 7%...’in a world of nearly 0% rates’, he added: ‘it is clear that there will be frustration on bondholders’.
The market has obviously reacted in a negative way, the offer will be disclosed next month and a new chapter of this saga will be disclosed.