Financial Times – Argentina’s new economy minister, Martín Guzmán, pledged that the new government would avoid confrontation and seek constructive relations with its creditors, as it seeks to stave off its ninth sovereign debt default.
In his first public comments as minister, the Columbia University economist avoided precise definitions but warned of the “extreme fragility” of the economy, pledging not to implement the kind of “brutal adjustment” resorted to by the previous government of Mauricio Macri.
“We are navigating through a narrow passage. Our programme is to brake the fall, given the restrictions we face. What happened in these last years led to this crisis. The previous model didn’t work,” Mr Guzmán told reporters on Wednesday night.
Mr Guzmán, who is a critic of the IMF and a sceptic of austerity measures, added: “We want to fix the situation of virtual default, and negotiations with the IMF have already begun.”
The disciple of the Nobel laureate Joseph Stiglitz is understood to favour a swift resolution to Argentina’s debt negotiations, as soon as March next year, given the urgent need for debt relief in order to resume economic growth. Mr Guzmán has also argued that Argentina should not request any further disbursements from the IMF, with some $12bn in payments pending.
According to local media, he will seek to suspend capital and interest payments for at least two years, in order to give the country a chance to escape from recession and be in a stronger position to pay its debt once the economy is growing again.
It remains unclear whether the plan would include a haircut on principal. The March deadline is seen by some investors as somewhat of a challenge. “That is a short amount of time to get something achieved,” warned John Morton, a portfolio manager at investment firm Lord Abbett. “The best they can probably get by March is something that kicks the can down the road.”
Moreover, according to one international investor who holds the country’s debt, “combining pro-growth policies and no haircuts is going to be difficult to accomplish.”
Days before travelling to Buenos Aires to join the new government, Mr Guzmán met the new managing director of the IMF, Kristalina Georgieva, as well as the new chief of mission for Argentina, Luis Cubeddu, a Venezuelan economist.
President Alberto Fernández announced on Wednesday that he will send three bills to congress on Monday aimed at declaring economic, social and public health emergencies, as well as suspend the 2019 budget law. That will enable the government to act through decrees rather than seeking approval from congress.
On Wednesday Mr Fernandez also had meetings with Cuba’s president, Miguel Díaz Canel, as well as a delegation from the US, after Donald Trump’s envoy to his inauguration, Mauricio Claver-Carone, left early in protest at the presence of a representative of the government of Venezuela’s Nicolás Maduro.