When will Argentina default ?

[TheDonald]

I think that the inevitable default will mostly be a nonevent related to daily life for the average Argentine. Markets have already priced in a default of about 60 cents on the dollar. Markets have also priced in substantial inflation for the next few years, and the peso's decline against the dollar reflects that. 2F holds all the power in any debt negotiation. Unlike a private lender, there isn't much bondholders or the IMF can do punitively against Argentina. Before, Elliot procured a judgement against Argentina in NY, which shut the country off from international debt markets. I'm not sure 2F is worried about this. Cristina has been there, done that. The IMF can't do anything punitive to Argentina either.

In a debt restructuring, each successive dollar of default favors Argentina and harms creditors. But from a market perspective, does Argentina really care if it defaults on $60B or $70B of debt? Argentina is effectively shut out of international debt markets anyway - theoretically the country could borrow. But when their investment bankers tell 2F what the interest rate will be, the latter will say "No Gracias."

I don't think 2F will agree to any restructuring that ties their hands in disbursing socialist largess. As I said, 2F holds more power in negotiation than either the bondholders or the IMF. Consider also that genteel investors no longer own Argentine debt; as the situation got more distressed, the hedge funds swooped in. The investors that now own Argentina's bonds have bought at 40 cents on the dollar. If they make a nickel plus interest in two years, that's a great return for their limited partners.

I think the most important thing to remember is that no creditor can do anything punitive to Argentina. And Argentina can probably say adios to borrowing in international markets anytime soon. So Argentina has no incentive to enter an unfavorable deal.

 

[Pierre Smith]

^ like everything else Macri did, he bungled it: he timed his election-serving electricity rate cuts wrong and people got them a couple weeks after the election instead of a couple weeks before. He can't even manage cynical vote buying.

 

[sts7049]

my question is, if there is a default will a corralito follow?

 

[Bajo_cero2]

Argentina already defaulted with MM.

 

[Ries]

as the Donald mentioned, a lot of this debt has already been written way down.
Remember, when Singer (Elliot) bought the debt he had, he paid so little that when the K's paid him off, at a very steep discount, he still made a 392% gain.
The original buyers of much of this debt have long since taken the losses, and sold it to vultures of the debt world.
Which means that the impact, globally, wont be anywhere as bad as many here are speculating.

 

[FallenAngel]

as the Donald mentioned, a lot of this debt has already been written way down. ... Which means that the impact, globally, wont be anywhere as bad as many here are speculating.

Defaults are neutral events. They never cause an issue. Party A loans $100 to party B. Party B defaults. Party A lost money and party B gained money. It was a neutral event. No value was lost. The default itself can only cause issues if you believe party A can utilize the money better than party B and thus the economy was robbed of a more productive actor having capital.

My point is that defaults themselves are not the problem. The problem is the reason why a default was necessary in the first place. You seem focused on the default. Tomorrow the lenders can say "We forgive all debt to Argentina" and thus no default. That still does not improve the situation.

The default is just the manifestation of the deeper problems that affect Argentina. Bad policy, poor productivity, deteriorating infrastructure, investment that produces negative returns, global slowing economy, aging population, etc.

 

[Ries]

The issue with the corralito was not default- it was the devaluing of dollar deposits in Argentine bank accounts. The government forbade all withdrawals of dollars from dollar denominated accounts, and enforced a new exchange rate that was something like 70% lower than the deposits value. In essence, the government seized all those dollars that people had deposited, and then paid them in pesos at a 66% discount. So savings were suddenly worth 1/3 or so of what they were the day before.

Not a default on external debt, but a government seizure of individuals funds and confiscation of huge amounts of them.

I find it extremely unlikely that a new government will repeat that. Plus, argentines have learned their lesson, and dollars are not in ordinary bank accounts- they are under mattresses, in real estate, in Miami, in Uruguay, or in the case of businesses, in inventory- many companies have been putting pesos into inventory, because if there is devaluation, the goods will hold value better than currency.

 

[camel]

The issue with the corralito was not default- it was the devaluing of dollar deposits in Argentine bank accounts. The government forbade all withdrawals of dollars from dollar denominated accounts, and enforced a new exchange rate that was something like 70% lower than the deposits value. In essence, the government seized all those dollars that people had deposited, and then paid them in pesos at a 66% discount. So savings were suddenly worth 1/3 or so of what they were the day before.

Not a default on external debt, but a government seizure of individuals funds and confiscation of huge amounts of them.

It sounds similar to what the US did in 1934 with gold. They decided the rate of gold and took people's gold at that rate.

Gold Reserve Act - Wikipedia

en.wikipedia.org

 

[camberiu]

"Argentina has very little imports."

Huh?
The entire infrastructure of this country is dependent on imports, from telecommunications to electricity to transportation.
Not a single piece of semiconductor, you know the building block of a postindustrial society, is manufactured in Argentina.

 

[dilmah]

Argentina has very little imports.

what is the source of this statement?

Looking at https://oec.world/en/visualize/tree_map/hs92/import/arg/all/show/2017/
Argentina is importing MORE stuff than it exports. $66 billion imports vs. $59 billion exports.

It imports vehicles, machinery, electronics.