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Argentina Teeters on Default, Again, as Pandemic Guts Economy Argentina Teeters on Default, Again, as Pandemic Guts Economy
(about 13 hours later)
BUENOS AIRES — Argentina is hurtling toward default on international loans in two weeks, a prospect that threatens to revive its reputation as a serial deadbeat and global financial pariah that could haunt the Latin American country long after the coronavirus pandemic is over.BUENOS AIRES — Argentina is hurtling toward default on international loans in two weeks, a prospect that threatens to revive its reputation as a serial deadbeat and global financial pariah that could haunt the Latin American country long after the coronavirus pandemic is over.
If Argentina defaults, which as of Friday appeared likely, it would be the third time in two decades that the country has failed to meet loan payments after having amassed billions of dollars in foreign debt in a deepening spiral of economic dysfunction. Argentina would join Lebanon as the first defaulters in the financial tumult caused by the coronavirus.If Argentina defaults, which as of Friday appeared likely, it would be the third time in two decades that the country has failed to meet loan payments after having amassed billions of dollars in foreign debt in a deepening spiral of economic dysfunction. Argentina would join Lebanon as the first defaulters in the financial tumult caused by the coronavirus.
Argentina’s 45 million people already were suffering through the third year of a serious downturn when the coronavirus scourge hit, accelerating the economic pain by forcing a lockdown that closed many businesses and left workers jobless.Argentina’s 45 million people already were suffering through the third year of a serious downturn when the coronavirus scourge hit, accelerating the economic pain by forcing a lockdown that closed many businesses and left workers jobless.
That suddenly threw a wrench into the government’s plans to restructure $66 billion in debt owed to a range of mostly foreign creditors that include Wall Street investment banks and other private investors around the world. Some of that debt is a vestige of unpaid loans from Argentina’s default in 2001.That suddenly threw a wrench into the government’s plans to restructure $66 billion in debt owed to a range of mostly foreign creditors that include Wall Street investment banks and other private investors around the world. Some of that debt is a vestige of unpaid loans from Argentina’s default in 2001.
The country faces a $500 million interest payment May 22.The country faces a $500 million interest payment May 22.
The center-left government, elected just seven months ago, says it cannot afford to meet obligations to international creditors at a time when it is raising health care spending and providing emergency cash to Argentines already reeling from soaring inflation and rising poverty.The center-left government, elected just seven months ago, says it cannot afford to meet obligations to international creditors at a time when it is raising health care spending and providing emergency cash to Argentines already reeling from soaring inflation and rising poverty.
International creditors have scoffed at the plan Argentina presented to restructure the debt, which came and went with a Friday deadline.International creditors have scoffed at the plan Argentina presented to restructure the debt, which came and went with a Friday deadline.
There is little sign that the creditors and government are close to striking a deal. Barring an agreement for an extension beyond May 22 to hold further negotiations, Argentina would default for the ninth time in its history.There is little sign that the creditors and government are close to striking a deal. Barring an agreement for an extension beyond May 22 to hold further negotiations, Argentina would default for the ninth time in its history.
“It’s very difficult to see how they can reach an agreement when both sides say they are in the right,” said Jimena Blanco, head of the Americas research team at Verisk Maplecroft, a risk consultancy that has assigned an 89 percent probability to a default by the end of the year. “Argentina presented its offer and said it is the only offer — you either take it or leave it.”“It’s very difficult to see how they can reach an agreement when both sides say they are in the right,” said Jimena Blanco, head of the Americas research team at Verisk Maplecroft, a risk consultancy that has assigned an 89 percent probability to a default by the end of the year. “Argentina presented its offer and said it is the only offer — you either take it or leave it.”
The administration of President Alberto Fernández, which took office in December, has signaled in recent days that it is willing to make some concessions. But the government has said it has little room to maneuver, considering its economy is projected to shrink by 6.5 percent this year.The administration of President Alberto Fernández, which took office in December, has signaled in recent days that it is willing to make some concessions. But the government has said it has little room to maneuver, considering its economy is projected to shrink by 6.5 percent this year.
The government’s offer to creditors envisioned a three-year grace period on future payments, a 5.4 percent reduction in the loan balance and a 62 percent cut in interest payments. The three largest bondholder groups said no.The government’s offer to creditors envisioned a three-year grace period on future payments, a 5.4 percent reduction in the loan balance and a 62 percent cut in interest payments. The three largest bondholder groups said no.
Argentina’s latest crisis follows years of efforts to reinsert itself into the global economy following its default in 2001 on about $100 billion in debt, which led to one of the largest economic collapses in recent history in Latin America and years of litigation in American courts.Argentina’s latest crisis follows years of efforts to reinsert itself into the global economy following its default in 2001 on about $100 billion in debt, which led to one of the largest economic collapses in recent history in Latin America and years of litigation in American courts.
The story of how Argentina once again is facing such a disaster is partly rooted in its success in escaping previous defaults.The story of how Argentina once again is facing such a disaster is partly rooted in its success in escaping previous defaults.
When Mr. Fernández’s predecessor, Mauricio Macri, was sworn in as president in December 2015, global financial markets began warming up to Argentina. The new government set in motion an ambitious plan to scrap subsidies and other fiscally unsustainable policies implemented by the two presidents who preceded Mr. Macri, both leftist populists.When Mr. Fernández’s predecessor, Mauricio Macri, was sworn in as president in December 2015, global financial markets began warming up to Argentina. The new government set in motion an ambitious plan to scrap subsidies and other fiscally unsustainable policies implemented by the two presidents who preceded Mr. Macri, both leftist populists.
Mr. Macri’s immediate predecessor, Cristina Fernández de Kirchner, led a furious battle against the holdout creditors she frequently referred to as vulture funds. She is now vice president.Mr. Macri’s immediate predecessor, Cristina Fernández de Kirchner, led a furious battle against the holdout creditors she frequently referred to as vulture funds. She is now vice president.
Early in his presidency, Mr. Macri settled the remaining legal battles with creditors in American courts and began issuing debt again with attractive rates of interest. Suddenly, foreign investors were eager for them.Early in his presidency, Mr. Macri settled the remaining legal battles with creditors in American courts and began issuing debt again with attractive rates of interest. Suddenly, foreign investors were eager for them.
But then Argentina was slammed with a mix of economic shocks that weakened its currency, the peso, making interest payments on the bonds more costly. The challenges included a recession in its giant neighbor Brazil, rising interest rates in the United States and a devastating drought in 2018.But then Argentina was slammed with a mix of economic shocks that weakened its currency, the peso, making interest payments on the bonds more costly. The challenges included a recession in its giant neighbor Brazil, rising interest rates in the United States and a devastating drought in 2018.
All the gains Argentina had made in reducing poverty over the past decade went into reverse, and Mr. Macri sought a $57 billion loan from the International Monetary Fund.All the gains Argentina had made in reducing poverty over the past decade went into reverse, and Mr. Macri sought a $57 billion loan from the International Monetary Fund.
The bleak outlook for Argentina turned catastrophic as the new coronavirus was declared a pandemic in March.The bleak outlook for Argentina turned catastrophic as the new coronavirus was declared a pandemic in March.
Argentina imposed one of the strictest lockdowns in Latin America on March 20, which has helped to keep the number of deaths relatively low from Covid-19, the disease caused by the virus. But those measures, which included shuttered borders and strictly enforced quarantines, have gutted an economy that was already weakened.Argentina imposed one of the strictest lockdowns in Latin America on March 20, which has helped to keep the number of deaths relatively low from Covid-19, the disease caused by the virus. But those measures, which included shuttered borders and strictly enforced quarantines, have gutted an economy that was already weakened.
The pain has been felt acutely by many Argentines who had hoped for better times.The pain has been felt acutely by many Argentines who had hoped for better times.
Hernán Calliari, 40, and his business partner, owners of the Faraday bar and restaurant in the Palermo neighborhood of Buenos Aires, opened it with confidence in 2017 but then struggled. As the peso’s value shriveled and inflation reached 50 percent annually, it became far more expensive for the business to make money.Hernán Calliari, 40, and his business partner, owners of the Faraday bar and restaurant in the Palermo neighborhood of Buenos Aires, opened it with confidence in 2017 but then struggled. As the peso’s value shriveled and inflation reached 50 percent annually, it became far more expensive for the business to make money.
Mr. Calliari said that with the pandemic lockdown, he is now barely surviving from a delivery operation yielding only about 15 percent of his usual revenue.Mr. Calliari said that with the pandemic lockdown, he is now barely surviving from a delivery operation yielding only about 15 percent of his usual revenue.
“We’re treading water, desperately trying to stay afloat,” he said. “I can’t think about what will happen if a big wave comes crashing down on us now.”“We’re treading water, desperately trying to stay afloat,” he said. “I can’t think about what will happen if a big wave comes crashing down on us now.”
If these were ordinary times, economists say, Argentina would get little sympathy for verging on default again. But the broader economic meltdown caused by the coronavirus may oddly give it some bargaining leverage.If these were ordinary times, economists say, Argentina would get little sympathy for verging on default again. But the broader economic meltdown caused by the coronavirus may oddly give it some bargaining leverage.
“Covid-19 improves Argentina’s chances of receiving a favorable deal,” said Miguel Kiguel, a former finance secretary who runs Econviews, a consultancy. “Creditors are losing money everywhere and Argentine bonds are at a very low value so there is a possibility that if Argentina makes a reasonable offer” creditors will not object.“Covid-19 improves Argentina’s chances of receiving a favorable deal,” said Miguel Kiguel, a former finance secretary who runs Econviews, a consultancy. “Creditors are losing money everywhere and Argentine bonds are at a very low value so there is a possibility that if Argentina makes a reasonable offer” creditors will not object.
Claudio Loser, the former director of the I.M.F.’s Western Hemisphere Department, agreed that the pandemic could make creditors reluctant to insist on tough repayment terms.Claudio Loser, the former director of the I.M.F.’s Western Hemisphere Department, agreed that the pandemic could make creditors reluctant to insist on tough repayment terms.
“Creditors have to be careful because I don’t think they’ll find the same sympathy for their cause as they did in the past,” he said. “There’s a perception of force majeure due to the pandemic and in that context what is happening to Argentina is much more understandable.”“Creditors have to be careful because I don’t think they’ll find the same sympathy for their cause as they did in the past,” he said. “There’s a perception of force majeure due to the pandemic and in that context what is happening to Argentina is much more understandable.”
Updated June 1, 2020 Updated June 2, 2020
Mass protests against police brutality that have brought thousands of people onto the streets in cities across America are raising the specter of new coronavirus outbreaks, prompting political leaders, physicians and public health experts to warn that the crowds could cause a surge in cases. While many political leaders affirmed the right of protesters to express themselves, they urged the demonstrators to wear face masks and maintain social distancing, both to protect themselves and to prevent further community spread of the virus. Some infectious disease experts were reassured by the fact that the protests were held outdoors, saying the open air settings could mitigate the risk of transmission.
Exercise researchers and physicians have some blunt advice for those of us aiming to return to regular exercise now: Start slowly and then rev up your workouts, also slowly. American adults tended to be about 12 percent less active after the stay-at-home mandates began in March than they were in January. But there are steps you can take to ease your way back into regular exercise safely. First, “start at no more than 50 percent of the exercise you were doing before Covid,” says Dr. Monica Rho, the chief of musculoskeletal medicine at the Shirley Ryan AbilityLab in Chicago. Thread in some preparatory squats, too, she advises. “When you haven’t been exercising, you lose muscle mass.” Expect some muscle twinges after these preliminary, post-lockdown sessions, especially a day or two later. But sudden or increasing pain during exercise is a clarion call to stop and return home.Exercise researchers and physicians have some blunt advice for those of us aiming to return to regular exercise now: Start slowly and then rev up your workouts, also slowly. American adults tended to be about 12 percent less active after the stay-at-home mandates began in March than they were in January. But there are steps you can take to ease your way back into regular exercise safely. First, “start at no more than 50 percent of the exercise you were doing before Covid,” says Dr. Monica Rho, the chief of musculoskeletal medicine at the Shirley Ryan AbilityLab in Chicago. Thread in some preparatory squats, too, she advises. “When you haven’t been exercising, you lose muscle mass.” Expect some muscle twinges after these preliminary, post-lockdown sessions, especially a day or two later. But sudden or increasing pain during exercise is a clarion call to stop and return home.
States are reopening bit by bit. This means that more public spaces are available for use and more and more businesses are being allowed to open again. The federal government is largely leaving the decision up to states, and some state leaders are leaving the decision up to local authorities. Even if you aren’t being told to stay at home, it’s still a good idea to limit trips outside and your interaction with other people.States are reopening bit by bit. This means that more public spaces are available for use and more and more businesses are being allowed to open again. The federal government is largely leaving the decision up to states, and some state leaders are leaving the decision up to local authorities. Even if you aren’t being told to stay at home, it’s still a good idea to limit trips outside and your interaction with other people.
Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks.Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks.
Common symptoms include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common. The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days.Common symptoms include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common. The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days.
If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.)If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.)
More than 40 million people — the equivalent of 1 in 4 U.S. workers — have filed for unemployment benefits since the pandemic took hold. One in five who were working in February reported losing a job or being furloughed in March or the beginning of April, data from a Federal Reserve survey released on May 14 showed, and that pain was highly concentrated among low earners. Fully 39 percent of former workers living in a household earning $40,000 or less lost work, compared with 13 percent in those making more than $100,000, a Fed official said.More than 40 million people — the equivalent of 1 in 4 U.S. workers — have filed for unemployment benefits since the pandemic took hold. One in five who were working in February reported losing a job or being furloughed in March or the beginning of April, data from a Federal Reserve survey released on May 14 showed, and that pain was highly concentrated among low earners. Fully 39 percent of former workers living in a household earning $40,000 or less lost work, compared with 13 percent in those making more than $100,000, a Fed official said.
Yes, but make sure you keep six feet of distance between you and people who don’t live in your home. Even if you just hang out in a park, rather than go for a jog or a walk, getting some fresh air, and hopefully sunshine, is a good idea.
Taking one’s temperature to look for signs of fever is not as easy as it sounds, as “normal” temperature numbers can vary, but generally, keep an eye out for a temperature of 100.5 degrees Fahrenheit or higher. If you don’t have a thermometer (they can be pricey these days), there are other ways to figure out if you have a fever, or are at risk of Covid-19 complications.Taking one’s temperature to look for signs of fever is not as easy as it sounds, as “normal” temperature numbers can vary, but generally, keep an eye out for a temperature of 100.5 degrees Fahrenheit or higher. If you don’t have a thermometer (they can be pricey these days), there are other ways to figure out if you have a fever, or are at risk of Covid-19 complications.
The C.D.C. has recommended that all Americans wear cloth masks if they go out in public. This is a shift in federal guidance reflecting new concerns that the coronavirus is being spread by infected people who have no symptoms. Until now, the C.D.C., like the W.H.O., has advised that ordinary people don’t need to wear masks unless they are sick and coughing. Part of the reason was to preserve medical-grade masks for health care workers who desperately need them at a time when they are in continuously short supply. Masks don’t replace hand washing and social distancing.The C.D.C. has recommended that all Americans wear cloth masks if they go out in public. This is a shift in federal guidance reflecting new concerns that the coronavirus is being spread by infected people who have no symptoms. Until now, the C.D.C., like the W.H.O., has advised that ordinary people don’t need to wear masks unless they are sick and coughing. Part of the reason was to preserve medical-grade masks for health care workers who desperately need them at a time when they are in continuously short supply. Masks don’t replace hand washing and social distancing.
If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others.If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others.
If you’re sick and you think you’ve been exposed to the new coronavirus, the C.D.C. recommends that you call your healthcare provider and explain your symptoms and fears. They will decide if you need to be tested. Keep in mind that there’s a chance — because of a lack of testing kits or because you’re asymptomatic, for instance — you won’t be able to get tested.If you’re sick and you think you’ve been exposed to the new coronavirus, the C.D.C. recommends that you call your healthcare provider and explain your symptoms and fears. They will decide if you need to be tested. Keep in mind that there’s a chance — because of a lack of testing kits or because you’re asymptomatic, for instance — you won’t be able to get tested.
Charity Navigator, which evaluates charities using a numbers-based system, has a running list of nonprofits working in communities affected by the outbreak. You can give blood through the American Red Cross, and World Central Kitchen has stepped in to distribute meals in major cities.
Ecuador recently reached an agreement with bondholders to delay interest payment on $20 billion in debt through August.Ecuador recently reached an agreement with bondholders to delay interest payment on $20 billion in debt through August.
Earlier this week, a group of 138 economists, including the Nobel laureates Joseph Stiglitz and Edmund S. Phelps, wrote an open letter supporting Argentina’s efforts to restructure its debt.Earlier this week, a group of 138 economists, including the Nobel laureates Joseph Stiglitz and Edmund S. Phelps, wrote an open letter supporting Argentina’s efforts to restructure its debt.
“Debt relief is the only way to combat the pandemic and set the economy on a sustainable path,” the economists wrote.“Debt relief is the only way to combat the pandemic and set the economy on a sustainable path,” the economists wrote.
Yet, to make meaningful concessions, like a three-year moratorium on payments, creditors will likely want to see a detailed plan on how Argentina intends to resuscitate sustainable growth, said Daniel Kerner, the managing director for Latin America at the Eurasia Group, a political risk consultancy.Yet, to make meaningful concessions, like a three-year moratorium on payments, creditors will likely want to see a detailed plan on how Argentina intends to resuscitate sustainable growth, said Daniel Kerner, the managing director for Latin America at the Eurasia Group, a political risk consultancy.
Ordinary Argentines would not likely feel the imminent impact of a default. The country is already locked out of international capital markets and investors are largely staying away — not just from Argentina but also from all so-called emerging economies.Ordinary Argentines would not likely feel the imminent impact of a default. The country is already locked out of international capital markets and investors are largely staying away — not just from Argentina but also from all so-called emerging economies.
“Defaulting would not really affect your credit today,” Mr. Kiguel said. “But you’d start to feel it when things begin to turn around,” he added, noting that Argentina would find it hard to get new lines of credit or attract new investment.“Defaulting would not really affect your credit today,” Mr. Kiguel said. “But you’d start to feel it when things begin to turn around,” he added, noting that Argentina would find it hard to get new lines of credit or attract new investment.
For many Argentines, the latest wave of uncertainty is part of a pattern.For many Argentines, the latest wave of uncertainty is part of a pattern.
Azul Agulla, 27, works in marketing and lives with her boyfriend, Santiago Dymensztein, a 28-year-old economist. The couple calculated that their wages have increased only 2 percent adjusted for inflation over the past two years, despite several promotions.Azul Agulla, 27, works in marketing and lives with her boyfriend, Santiago Dymensztein, a 28-year-old economist. The couple calculated that their wages have increased only 2 percent adjusted for inflation over the past two years, despite several promotions.
“We’re moving backward,” she said. “It feels like you’re constantly trying to escape from a hole that pulls you down.”“We’re moving backward,” she said. “It feels like you’re constantly trying to escape from a hole that pulls you down.”