Economy of Argentina, Bondholder Group and Coronavirus

The state of the local economy was from being ideal even before coronavirus pandemic. Argentina was struggling to deal with various problems. However, the coronavirus pandemic created additional pressure on the local economy.

The list of problems is quite impressive even for Latin America’s third-largest economy. One of the biggest challenges for the country is the excessive amount of debt. Recently, Argentina’s debt restructuring talks collapsed, amid escalating tensions between government officials and international creditors.

It is worth mentioning that the bondholder group as well as the government of Argentina published statements on Wednesday. Interestingly, the bondholder group accused the government while the country’s government accused the group. People should keep in mind that the bondholder group, which consists of 13 international asset managers, is the largest creditor group to Argentina.

According to Argentina’s government, it could not commit to the terms offered by creditors. Moreover, the government claimed that some of the terms were largely inconsistent with the debt sustainability framework necessary for Argentina to restore macroeconomic stability.

Based on the information provided by the country’s government, the negotiation process with our investor community revealed one interesting fact. Unfortunately, investor demands frequently diverge and cannot be readily reconciled.

The state of the local economy

South America’s second-largest economy tumbled into its ninth sovereign debt default on 22 as the country was unable to pay interest payments. As the government of Argentina and the bondholder group failed to reach an agreement, around $65 billion in bonds could be left in default for an extended period of time.

However, the largest creditor group of Argentina does not agree with the agreement. According to the statement released by the bondholder group, Argentina’s government abandoned a comprehensive and sustainable debt restructuring offer.

The country’s government, as well as the bondholder group, wanted to reach a deal ahead of a June 19 deadline. The country is already in default. Moreover, the deadline has already been pushed back four times.

Importantly, the country’s economy was already struggling to deal with a two-year recession as well as very high inflation rates and rising levels of poverty. Moreover, the coronavirus pandemic caused even bigger problems. The coronavirus pandemic is a serious problem not only for the local economy but for the global economy in general.

Argentina should work with the bondholder group to find the solution that will be acceptable for all sider. It won’t be easy to reach an agreement. However, without a deal, it will hard to boost the economy.