- Title: Argentine bond prices fall, country risk soars on debt 'reprofiling' plan
- Date: 29th August 2019
- Summary: PILAR, BUENOS AIRES PROVINCE (FILE - NOVEMBER 2018) (REUTERS) VARIOUS OF PLANT AT LOCAL BUSINESS SIGN THAT READS (Spanish) "ARGENTINE DESIGN, WORLD DESTINATION"
- Embargoed: 12th September 2019 22:20
- Location: BUENOS AIRES, ARGENTINA
- City: BUENOS AIRES, ARGENTINA
- Country: Argentina
- Topics: Government/Politics
- Reuters ID: LVA002AU9W8JR
- Aspect Ratio: 16:9
- Story Text:Argentine bond prices fell on Thursday (August 29) and country risk soared to levels not seen since 2005 after the government announced plans to extend maturities on about $100 billion in debt, raising fear of a full-blown financial crisis.
The latest round of volatility to buffet the recession- and inflation-racked country began when business-friendly President Mauricio Macri suffered a harsh defeat in an Aug. 11 primary election at the hands of populist-leaning Alberto Fernandez.
Investors fear a return of the left to power in Argentina could herald a new era of heavy government intervention in Latin America's third-largest economy.
By the time Treasury Minister Hernan Lacunza said on Wednesday (August 28) the government wanted to extend maturities of short-term debt, and would negotiate new time periods for loans to be paid back to the International Monetary Fund, a debt revamp was already widely expected.
Argentine spreads over safe-haven U.S. Treasury bonds, a measure of the perceived risk of default, nonetheless shot 204 basis points higher to 2,276 on Thursday, according to JP Morgan's Emerging Markets Bond Index Plus.
Developing markets investment house Tellimer calculates that $7 billion of short-term debt, $50 billion in long-term debt and $44 billion of IMF debt may be earmarked for an overhaul.
Lacunza labelled the debt-extension operation a "reprofiling" of obligations that will affect institutional rather than individual investors.
Fernandez, whose running mate is former President Cristina Fernandez de Kirchner, is now the clear front-runner. Populist icon Kirchner is loved by millions of Argentines who remember generous welfare spending during her 2007-2015 administration.
Restructurings are a traumatic subject for voters who remember the country's 2001 default, part of an economic meltdown that tossed millions of middle-class Argentines into poverty. Subsequent mini-defaults kept the country locked out of global capital markets for years.
Macri prided himself on getting the country out of default early in his administration and promised to reintegrate Argentina with the global markets. But he overestimated his ability to attract the foreign direct investment needed to provide Argentina with sustained economic growth.
(Production: Horacio Soria, Juan Bustamante)
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