Argentina Won’t Extend Maturities on Dollar Debt, Fernandez Says
Argentina plans to obtain new funding from multilateral lenders like the Inter-American Development Bank for projects and won’t roll over existing debt, President Cristina Fernandez de Kirchner Fernandez said.
“The other day I heard there are opportunities to get cheap debt in the world. If that means taking on debt for public works, fantastic,” Fernandez said today during a speech on the outskirts of Buenos Aires. “Is that the debt you want or to roll over debt? Because every time you extend a maturity you pay fees and interest to the banks. So don’t come to me without explaining what kind of debt we’re talking about.”
Fernandez said that while she is open to discussions with bankers, industry leaders and unions, she will maintain policies introduced by her and her late husband and predecessor Nestor Kirchner. In Aug. 11 primary elections, support for the ruling Victory Front dwindled to 26 percent, the least since Kirchner won the presidency in 2003 with 22 percent backing.
Argentina has $2 billion of dollar bonds coming due on Sept. 12 and another $5.8 billion maturing in 2015.
Since taking office in 2007, Fernandez has seized $24 billion of private pension funds, nationalized the country’s largest oil company and tightened control of the foreign exchange market by limiting imports, forcing companies to repatriate money held abroad and banning most purchases of foreign currency. Those measures have helped push up borrowing costs to an average 12.98 percent, the highest in emerging markets.
In her first public appearance since the primaries to choose candidates for congressional mid-term elections in October, the 60-year-old president, said she won’t devalue the peso. The currency has weakened 11.7 percent this year, the most among major Latin American currencies after Venezuela’s bolivar.
Fernandez also defended her use of foreign reserves to pay debt and the lack of an inflation target. Consumer prices rose 24.9 percent in July from a year earlier, according to a report released by opposition lawmakers today based on private economist estimates. Official data, which has been questioned by the International Monetary Fund, show annual inflation at 10.5 percent in June.
“Do you know what governing with an inflation target means?” Fernandez said. “It’s putting a pad lock on salaries because they argue that salary increases are inflationary.”
Argentina hasn’t tapped international credit markets since defaulting on $95 billion of debt in 2001. While most of the defaulted debt was restructured in 2005 and 2010 at about 30 percent of face value, the country is locked in a U.S. court battle with a group of investors led by billionaire hedge fund manager Paul Singer. The so-called holdouts, who own defaulted bonds that weren’t tendered in the restructuring, are seeking better terms.
In 2010, Fernandez started to use central bank reserves to make payments on foreign debt. She has also borrowed money from the national pensions agency to fund government spending.
Barclays Plc said on Aug. 12 the primary election results were “market positive” as they decrease the possibility of Fernandez seeking a constitutional amendment for a third term and that political change should be expected in 2015 when presidential elections are held.
“I was told Wall Street is happy today,” Fernandez said. “We should be worried because every time Wall Street is happy the Argentine people have a bad time.”
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