Argentina default concerns grow after market crash

[Eugene]

Source: Reuters

BUSINESS NEWS AUGUST 13, 2019 / 9:48 AM / UPDATED 3 HOURS AGO

Argentina default concerns grow after market crash

Tom Arnold, Marc Jones
3 MIN READ

LONDON (Reuters) - Concerns about Argentina adding to its long list of sovereign defaults swirled on Tuesday, as investors continued to digest the heavy defeat of pro-reform President Mauricio Macri in the country’s primary elections at the weekend.

Credit default swap prices from data provider IHS Markit showed five-year credit default swaps (CDS) marked at 2,116 basis points, up from what was already a five-year high of 1,994 bps the previous day. At those levels, the probability of a default within five years is estimated to be between 70% and 75%.

Argentina last defaulted on its debt in 2001, an event which sparked years of recessions and economic crises.

Bank of America Merrill Lynch’s Claudio Irigoyen, who used to be the chief economist at Argentina’s central bank, cautioned of a worsening outlook as well.

-snip-

Read more: https://www.reuters.com/article/us-argentina-markets-cds/argentina-default-concerns-grow-after-market-crash-idUSKCN1V31BI

[sandensea]

1. Argentina has been in disguised default since May 2018, when Macri ran to the IMF for a bailout

Macri doubled an already burdensome foreign public debt in just 2­­ ½ ­­­­­years, mostly to finance capital flight (as well as ballooning current account deficits due to a wave of imports in 2017-18).

And when the current account figures for 2017 were published­, the foreign bond markets stopped lending to him.

That's when foreign investors (mostly short-term speculators) pulled out - and two months later, on May 8, 2018, he ran to the IMF for a record-setting bailout.

IMF loans - $45 billion disbursed thus far in just 14 months - have been paying Argentina's foreign bills.

The IMF itself considers this bailout "unsustainable" - but they were forced to lend Macri the money by, you guessed it: Cheeto.

So the bailout will have to be either rescheduled - turning the four year standby into a 10-year extended facility - or, if the IMF refuses (on Trump's orders) to negotiate by no later than 2021, defaulted on outright.

28 other countries have over the years - usually for the same reason: bad-faith bailouts of U.S.-supported right-wing kleptocracies, on orders from Washington, that proved utterly unpayable.

And now Macri's seeking $20 billion from the U.S. Treasury - which many believe Trump will grant him on purely ideological grounds (the Argentine president is known as the "Trump of the Pampas" ).

What could go wrong!?

Thanks for keeping up with this, Eugene. Let's hope for the best.