Relative ‘Calm’ of Argentine Markets Hides Profound Problems

Sept. 3, 2019 (EIRNS)—Following yesterday’s implementation of exchange controls announced on Sept. 1, the Argentine currency strengthened slightly, trading at 58 to the dollar rather than the 62 of Aug. 30. But little is settled. Today, the local Merval stock index was down 11.5%, while Argentine stocks and bonds on Wall Street plummeted by 8.9%.

Uncertainty reigns. President Mauricio Macri hasn’t said a word in public since the Sept. 1 announcement of currency controls, leaving his Finance Minister Hernan Lacunza and Central Bank head Guido Sandleris to explain everything. Macri cancelled his appearance at the annual Industry Day celebration yesterday, sending his Production Minister Dante Sica instead to face businessmen, irate over the economic debacle that IMF policies have wrought.

Bloomberg writes today that if Argentine bonds continue to depreciate—currently they are trading at between 38-40 cents on the dollar—vulture funds will soon be swooping in, as “Argentina is again looking like a ripe target for funds that specialize in wringing value out of distressed assets.”

According to Página 12, a brawl occurred at the Aug. 30 “informal” IMF Board meeting, to discuss the Argentine situation. Sweden, Holland and Italy opposed disbursing the next $5.4 billion IMF tranche to Argentina, on grounds that Macri hasn’t complied with the terms of the $57 billion standby agreement. They recommend waiting until a new government takes power to see where the chips fall. The U.S. supports disbursing the funds. Reportedly, several of the IMF board members were critical of the “flexibility” with which the Fund dealt with Argentina, which stands in contrast to its much harsher treatment of other countries. Whether the $5.4 billion will be disbursed is still up in the air, however.