With Argentina's Decade in Financial Wilderness Over, Macri Must Turn to Growth

Updated on
  • Country plans to sell $10 billion of overseas bonds in 2017
  • Government still facing growth, inflation challenges

Argentina’s borrowing costs have tumbled since Mauricio Macri was inaugurated as president in December 2015.

In the past year, he’s dismantled most of the country’s currency controls and, crucially, ended a feud with bondholders, allowing Argentina to access to global debt markets after more than a decade in the wilderness.

But even as the government prepares another sale of dollar debt this week, Macri is still grappling with an economy in the doldrums, stubborn inflation -- starting to slow from a peak of as high as 47 percent in Buenos Aires -- and a crippling budget deficit.

Capital Markets

  • Argentina is looking to sell $10 billion of foreign debt in 2017 after issuing $19 billion last year, when it ended a 15-year hiatus following its historic default on $95 billion of debt.
  • Yields on Argentina’s notes due in 2024 have tumbled 2 percentage points since Macri’s inauguration in December 2015.
  • To capitalize on soaring investor demand, Argentina started issuing fixed-rate peso bonds for the first time in nine years in August. JPMorgan Chase & Co. also said Jan. 5 that Argentina’s local government bonds were eligible for its index and may be added as soon as late February.


  • On Jan. 5, the government removed a rule requiring financial portfolio investments remain in the country for at least 120 days, part of an ongoing effort to jettison the nation’s capital controls. The move may lead to a reclassification of Argentina’s stocks by MSCI Inc. to emerging markets in June.
  • In one of his first moves as president, Macri lifted a crawling peg on the peso and allowed it to trade freely. The currency weakened 38 percent since the move, but remains stronger than most analysts had forecast.


  • Macri has said Argentina is on the verge of exiting a year-long recession and should grow more than the 2.7 percent forecast by the International Monetary Fund in 2017. Still, the government last year had to revise down its projections for a recovery as the reforms Macri implemented damped demand.
  • The central bank has managed to slow inflation after ratcheting up a key interest rate last year. But core inflation has remained unchanged in the past few months.
  • The government expects to post a 4.2 percent deficit in 2017 as spending remains high to pull the economy out of its slump.


  • “We’re still holders, we’re still buyers of Argentine debt," said Jim Dondero, the president and co-founder of Dallas-based Highland Capital Management LP, which oversees $15 billion. "We’re optimistic. We characterize Argentina as ‘exceeded expectations’ on the regulatory and reform side. We continue to be optimistic overall for spread compression on the debt side.”
  • “The fast pace at which they took financial and political action has already brought huge gains to the country,” said Gerardo Rodriguez, a former Mexico Deputy Finance Minister who now manages emerging-market funds for BlackRock Inc. in New York. “Now, the next stage of changes will be harder because making changes on the margin is always more complicated. Especially in a context of slow economic growth.”
  • “I’m cautiously optimistic, on concerns that the government might not be able to achieve its targets for growth and inflation,” said Sean Newman, who helps manage $1.4 billion in emerging markets debt at Invesco Advisers Inc. “Their expectations are a bit more optimistic than what might actually occur.”
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