Argentina Government Nears Settlement Deal with Creditors

Argentina’s lower congressional house approved a bond settlement with creditors, and President Mauricio Macri expects to win support in the Senate, according to Reuters. The government would pay over $4.65 billion to a group of investors who are determined to see a return of their money.

The president has attempted to attract investors and spur the economy by working with creditors, but he faces an uphill battle as political opponents may stall some of his market-oriented policies. The proposed settlement derives from a $100-billion bond default in 2002.

Argentina’s lower congressional house approved a bond settlement with creditors, and President Mauricio Macri expects to win support in the Senate, according to Reuters. The government would pay over $4.65 billion to a group of investors who are determined to see a return of their money.

The president has attempted to attract investors and spur the economy by working with creditors, but he faces an uphill battle as political opponents may stall some of his market-oriented policies. The proposed settlement derives from a $100-billion bond default in 2002.

Argentina’s future is on the line as a successful deal could allow the South American nation to further integrate into world markets. Argentina would not only benefit from increased business, but a better credit rating that could lead to greater economic expansion.

Macri managed to push an agreement through Congress, but he had to make several concessions along the way to satisfy supporters of former President Cristina Fernández de Kirchner, a leftist leader who retains widespread support among many voters and congressional members.

Kirchner helmed an economy on the brink of financial ruin, leading to the election of Macri in late 2015. He is considered a sweeping reformer, but his negotiations with creditors remain unpopular among leftists. The left may be a thorn in his side, but analysts expect the bill to pass because he may propose infrastructure financing to entice left-leaning leaders.

Macri’s Goals

The new president has accomplished a great deal in a short period. He intends to undo most of Kirchner’s policies with the exception of vital social programs. He has taken such proactive measures as lowering import taxes and laying off public workers, and he aims to tackle rampant corruption. He also intends to meet with U.S. President Barack Obama, a move that could unlock billions of dollars in foreign investment. Both leaders will touch on trade and Argentina’s improved business climate.

Tone Shift

Macri has taken a more conciliatory tone to the U.S. and Wall Street than his predecessor. Kirchner was openly hostile against the U.S. and the finance community, believing that hedge funds and other financial interests conspired against her country.

The business community favors Macri because of his liberalization policies. Kirchner’s interventionist hand proved to be a detriment to the economy, causing the new president to lift certain burdens that included currency control.

Despite devaluation in the Argentine peso, many American companies remain eager to do business in Argentina, especially in light of an administration that is friendlier to free enterprise, and major firms are beginning to show interest. U.S. firm Procter & Gamble approves of Macri’s policies and intends to play a role in Argentina’s growth potential.