Bonds News

UPDATE 1-Argentina creditors slam government's 'erratic' policies, IMF delays

(Adds comments from other bondholders, background, detail)

BUENOS AIRES, Feb 17 (Reuters) - A group of major Argentine creditors has criticized the South American country for “erratic” economic policies that it says are preventing it from getting back on its feet after last year’s $65 billion foreign debt restructuring.

The Exchange bondholder group, involved in the restructuring that cured Argentina’s ninth sovereign default, added it was concerned talks with the International Monetary Fund over a new deal were being “subordinated to politics.”

“An IMF program is the only likely source of policy anchors and a credible medium-term framework that can bring stability,” the group said.

“However, the government appears to be seriously contemplating delaying an agreement with the IMF in order to have the freedom to continue its unsustainable policies.”

Argentina is currently in talks over a new IMF program to replace a failed facility from 2018, from which the country has already received some $44 billion but now cannot repay.

Argentina’s government did not immediately respond to a request for comment but has recently nudged back its timeline to strike a deal to May from March or April.

It is a target that the IMF says is ambitious though feasible. However, creditors and analysts say there is growing pressure from within the ruling Peronist coalition to delay the deal until after midterm elections in October.

Other bondholders have also become increasingly exasperated at the government’s approach, accusing it of squandering the breathing space last year’s debt deal provided.

It secured $60 billion of relief on its “hard currency” bonds over the next 10 years, but the bonds have slumped again since and the peso currently trades at a more than 60% discount on the black market to the official rate.

“The restructuring proved to be a big disappointment,” said Riccardo Grassi, head of risk management at Mangart Capital Advisors which was part of the ACC, one of Argentina’s other two main creditor groups last year.

“Debt relief has been decoupled from the necessary economic and structural adjustments,” he added. “The disastrous result is under the eyes of all.”


The Exchange group cited policies including price freezes, grains market interventions and capital controls as issues that were “short-term palliatives that are bound to fail and only store up greater problems down the road.”

“Erratic, ad hoc policymaking amid a growing list of policy mistakes and u-turns ... all erode confidence,” it said.

Blackrock Chief Executive Larry Fink was also quoted by Argentine media in November as saying it will take “a long time” for the private sector to feel comfortable investing there again. Blackrock had been one of the country’s biggest investors.

Grantham Mayo van Otterloo’s Carl Ross, meanwhile, who helped lead the ACC committee and is a veteran of restructurings, said the country’s post-deal travails have been “one of the great disappointments in the last several years”.

“The fact the country received as much debt relief as it did and bond prices are still stuck in the high 30s/low 40 is indicative of how low confidence has fallen. It represents a huge lost opportunity.” (Reporting by Adam Jourdan and Marc Jones in LONDON; Editing by Steve Orlofsky and Jonathan Oatis)