IMF halts 3 billion bailout tranche from Argentina

[MarketWatcher]

https://www.zerohedge.com/news/2018...d-low-imf-withholds-3-billion-bailout-tranche

 

[MarketWatcher]

 

[toongeorges]

This is not funny. In a couple of days I will be in Buenos Aires, I am not asking for a crisis and cheap pesos. I want to hang out with Argentinians, but when it is crisis, I think less people will show up at milongas...

 

[MarketWatcher]

Today's announcement are similar to the events leading to Argentina's 2001 crisis. In December 2001 the IMF suspended a 1.38 billion tranche from a 38 billion loan under president Fernado De La Rua. Leaving Argentina unable to make interest payment to bond holders, as well as the increase in capital flight, Argentina defaulted on 82 billion in bonds one month later...

Couple statement's of the article that stand out to me:

"bailout deal was postponed while the government hammers out the terms of the standby agreement, the largest in IMF history." (re-structuring of deal)

"IMF reportedly warning Argentina not to use the funds from the agreement to support the peso." (possible misuse of funds)


As usual large economic announcements happen before the weekend. Find out more on Monday.

 

[toongeorges]

Today's announcement are similar to the events leading to Argentina's 2001 crisis. In December 2001 the IMF suspended a 1.38 billion tranche from a 38 billion loan under president Fernado De La Rua. Leaving Argentina unable to make interest payment to bond holders, as well as the increase in capital flight, Argentina defaulted on 82 billion in bonds one month later...

Defaulting within 3 months of taking an IMF loan... I would be pissed off too.

 

[sergio]

Why don't they just dollarize?

 

[toongeorges]

Why don't they just dollarize?

The problem is the deficit, it won't go away with switching to dollars, it needs to go away with budget cuts, the painful it may be.

Chile managed to get its economy in order. Chile and Argentina off course are not the same country.

 

[camberiu]

Why don't they just dollarize?

Because you need to have dollar reserves in order to dollarize, and that is exactly what Argentina is lacking.
And also, as Toongeorges mentioned, you can't do that with a deficit. Today the government covers the budget shortfall by printing pesos. They can't print dollars, so they can't dollarize while running massive budget deficits.

 

[sergio]

Can't they cut the deficit and prepare for dollarization?

 

[PoorSoul]

I foresee much pain in the future of Argentina.