It is useless to bring up Covid19 for yet another Argentine default, the scent of which had been in the air for some time, since last autumn, and therefore well before the outbreak of the emergency. For about ten days now, the Government's proposal on 65 billion dollars of foreign debt, which includes a three-year moratorium and a reduction in the average rate of 2,5% (between 0,5 and 3,83%) , faces three groups of creditors, including:
- a dozen major mutual funds represented by White&Case LLP lawyers;
- a group of funds and corporates which represents 16% of the total;
- the Argentina Creditor Committee (ACC), made up of insurance companies, mutual funds and global fund managers.
All sides rejected the proposal, also due to the absence of a medium-long term economic strategy on the part of the Government and the absence of sensitive financial information, repeatedly denied by local institutions. The offer expires on May 10 and the triggering of the 30-day grace period on the first failure to pay the coupons is a calculated risk. The umpteenth currency crisis that hit the country two years ago forced former President Macrì to request a loan of 57 billion dollars from the IMF.
In detail, the offer includes five bonds in dollars and five in euros, with maturities between 2030 and 2047, but it must be said that since taking office last October, President Fernandez had urged the International Monetary Fund to renegotiate the loan, after the Central Bank had used up a third of reserves to try to defend the Argentine peso again under pressure. And the recession, which was forecast at -2% this year, has undergone a drastic revision due to the impact of the effects of the virus, tripling.
We must not forget then the serious social situation: the poverty line rose from 28,2% in 2017 to 33,6% in 2018, then reaching 35,5% in 2019. In many regions the level of 40% is exceeded and it reaches 70% among elderly, who have a third of what they need to make ends meet. This translates into over 16 million citizens without sufficient resources to guarantee essential goods and services, and in times of coronavirus the food alert actually exceeds the medical one.
THE CLASH OF ARGENTINA WITHIN MERCOSUR
And if capital flight were not enough, the country is also suffering from a recently rekindled internal disagreement over active participation in Mercosur, the free trade area of South America which includes, in addition to Argentina, Brazil, Paraguay, Uruguay and the Venezuela, suspended since December 2016. In fact, the clash forced the Minister of Foreign Affairs and International Trade Solà to deny an escape of Argentina, because although Mercosur is negotiating free trade agreements with various countries (including Canada, Korea of the South, India and Singapore), strong frictions remain with the European Free Trade Association (EFTA) and the expected signing with the European Union remains highly debated since last June. Currently, "the political agreement in principle" has been defined, but ratification, after 20 years of negotiations, still appears to be suspended due not only to the reluctance of Argentina, but also and above all of European farmers (Germans in the lead) to implement Opera. In fact, the widespread use of pesticides with intensive exploitation of the land (including polluting farms, for example) goes decidedly against the principles of the European Green Deal, which sees agriculture as one of the most advanced frontiers for a sustainable renewal of European economies .
THE FEUD BETWEEN THE MAPUCHES AND THE BENETTONS
But as demonstrated by years of correspondence between the Argentine Nobel Peace Prize winner Adolfo Perez Esquivel with the progenitor of the Benetton family, the land issue in South America takes on the facets of investigative journalism. The social chronicles describe years of errors in agricultural policies subservient to particular interests. For example, the claims of the indigenous indigenous peoples of the Mapuche for more than 20 years on part of the land purchased by the Benetton family and represented by the Compania de Tierras Sud Argentino have attracted activists from all over the world over the years. These joined the occupations that have alternated over the years, until the death of one of the same activists, Santiago Maldonado, in 2017. Recently made the news, this case shines a light on the other reality that has always characterized the South American countries, and that is the exploitation of the land between landowners and political collusion, which now see the finger pointed at the misdirection of the Macrì government.
Thus, on May 10, the ultimatum to the government's creditors will coincide with the resumption of production and commercial activities after the "lockout" due to COVID19. Basically, the game that the Argentine government is playing 6 months after taking office is once again a short-term strategy, with the aim of responding to immediate liquidity needs for the economic and banking system, which have worsened with the worsening of the recession due to the social costs of managing the emergency caused by the Covid19 pandemic. No long-term debt resolution plans and no commitment to move towards a virtuous fiscal surplus situation are in sight. Indeed, the plan published by Economy Minister Guzman does not highlight any programmatic policy for debt sustainability, but only the eternal Argentine dilemma on how to conduct a debt restructuring to mitigate a recurring default situation, on which the strength of the dollar it only exacerbates a Latin American flight from long-standing investment portfolios.
