On the streets of Buenos Aires, the capital of Argentina, in fact, you can rarely hear the song "Argentina, Don't Cry for Me", which was written by the British, once sung for Madonna , and was once popular all over the world.
is located in the southern hemisphere, and it is the middle of winter. In the night, the Madero Port District is still prosperous, with tourists coming on the Women's Bridge, and the avant-garde blocks on both sides of the canal are still bright and green.
However, as long as you really enter a little bit of the lives of locals, you can feel the storm of a rare "financial tsunami" in the past three weeks has caused in the Argentine stock market, foreign exchange market and bond market. Over the past three weeks, the deteriorating financial situation has forced the Argentine government to announce debt restructuring and foreign exchange controls one after another.
This time, Argentina was in tears.
Main stock indexes were cut in half, and the currency depreciation was 60%
triggering this "financial tsunami" was the primary election of the Argentine presidential election held on August 11.
The ruling central-right party presidential candidate Macri, who is seeking re-election, won only 32.09%, behind Alberto Fernandez, the presidential candidate of the central-left opposition coalition "National Front" who has a vote of 47.66%. The gap of
15 percentage points means that Fernandez and vice presidential candidate Christina Fernandez de Kirchner's "double fee combination" is likely to win the presidential election, and Macri's hope of re-election is slim.
August 12, in Buenos Aires, Argentina, President Macri attended a press conference. Xinhua News Agency/AFP
As financial investors were worried that the center-leftist would interrupt financial freedom policies after a comeback, on August 12, the Argentine stock market, foreign exchange market and bond market "all collapsed."
Buenos Aires Stock Exchange's major stock indexes plummeted 38% in one day, giving up the gains in the past few months. The peso fell 23%, the largest single-day drop since 2015. Ah sovereign bond fell by an average of 25%, while Ah sovereign bonds listed in New York fell by even more than 60%.
Argentina's "Horse" called it a "financial tsunami".
to August 30, data from the official website of the Argentine Central Bank showed that the exchange rate of Argentine peso against the US dollar has plummeted to 62.04:1, and has depreciated by 60% this year.
On August 14, in Buenos Aires, the capital of Argentina, pedestrians passed a currency exchange point. Xinhua News Agency (photo by Martin Sabala)
Also on August 30, the main stock index of the Buenos Aires Stock Exchange closed at 24,024 points, which is "halved" from the historical high of nearly 45,000 points on August 11.
The official website of the Argentina Central Bank shows that on September 5, the Argentina Central Bank has adjusted the benchmark interest rate to a frighteningly high of 85.8%. By comparison, Argentina's neighbor Chile currently has a benchmark interest rate of 2%, while Brazil is 5.25%.
htmlOn September 3, the Argentina national risk index released by the US investment bank JPMorgan Chase once soared to 2553 points, the peak in 14 years.When the appreciation of the dollar is like a kite with a broken string...
"When the appreciation of the dollar is like a kite with a broken string, it is meaningless to stick to the national foreign exchange reserves. The Argentine people need exchange rate stability." The new Argentine Finance Minister Hernan La Quinza, who took office on August 20, insisted on using the national foreign exchange reserves to stabilize the foreign exchange market.
Since the results of the primary election were announced on August 11, the Argentine central bank has sold more than US$2 billion to calm the foreign exchange market, but it is just a drop in the bucket.
Data from the Afghan central bank's official website shows that in order to repay loans, rescue the market, Afghanistan's foreign exchange reserves have dropped from US$67.76 billion on August 1 to US$54.1 billion on August 30, a sharp drop of US$13.66 billion, a month shrinking by 20%.
Compared with the country's foreign exchange reserves of only US$54.1 billion, Argentina's public debt of US$341.953 billion is too huge. According to data from the official website of the Argentina Ministry of Finance, as of the first quarter of this year, Argentina's public debt accounted for as much as 88.5% of the GDP.
The International Monetary Fund believes that Argentina's base currency and other fiscal indicators in July and August did not meet the standards required by the organization. At worst, the organization will refuse to issue the next $5.42 billion loan to Argentina in October. If the loan is not in place, Argentina will face the risk of debt restructuring or even default.
html In desperation, the new Finance Minister La Quinsa was forced to announce a partial debt restructuring on August 28, involving an amount of approximately US$101 billion. On September 1, the Argentine government announced foreign exchange control measures, and commercial banks must have the approval of the central bank before they can purchase foreign exchange. On September 3, the major indexes of the Argentine stock market fell by 11.9%, down to their lowest value in two years; the bond market also fell by 9%.On August 14, staff worked on a stock exchange in Buenos Aires, the capital of Argentina. Xinhua News Agency (Photo by Martin Sabala)
Researcher Xie Wenze, a researcher at the Latin American Economic Research Office of the Institute of Latin America, Chinese Academy of Social Sciences, said that the fundamental reason for the depreciation of the Argentine peso is the lack of foreign exchange. The Argentine government has two main purposes for implementing foreign exchange controls: one is to restrict the outflow of foreign exchange such as the US dollar; the other is that enterprises that import foreign goods must first export goods and earn foreign exchange, and then use earned foreign exchange to import goods. This requirement is called the "foreign exchange balance" mechanism.
Xie Wenze said that since the 1980s, Argentina has had two large-scale debt restructurings: one is to deal with the debt crisis in the 1980s, and the other is to deal with the economic crisis in 2001. The gap between Argentina's foreign exchange income, foreign exchange reserves and repayment of maturing foreign debts is too big, and it has no ability to repay, so debt restructuring is a helpless move. Will
reproduce the economic crisis in 2001?
Nobel Prize winner in economics and American economist Paul Krugman tweeted on September 3: "Cry for Argentina: When Macri took office, he was already facing the problem of 'double deficit' and serious current account imbalance. The answer given by the textbook is fiscal rectification plus currency depreciation to make up for the decline in domestic demand through exports. However, Macri is unwilling to cut budget expenditures, and the depreciation of the peso brings inflationary consequences, and the debt is denominated in US dollars, and the peso does not allow the peso to depreciate rapidly. As a result, Macri borrowed foreign debt from the International Monetary Fund, resulting in a significant increase in foreign debt. Macri could only raise interest rates sharply, implement fiscal austerity at the last moment, which eventually led to an economic recession."
"This is surprisingly similar to the plot staged by Argentina from 1998 to 2001," said Krugman .
In the second half of 1998, due to the impact of the Southeast Asian financial crisis and Brazil's financial turmoil, Argentina's economic decline, the national risk index soared, and foreign debt pressure intensified. In November 2001, the organization refused to continue to pay a loan of US$1.45 billion to Argentina, also because its fiscal indicators did not meet the standards required by the International Monetary Fund. The Argentine government was unable to repay its debts, and its finances collapsed, and then announced the freezing of residents' deposits, causing serious political, economic and social crises.
On August 14, citizens purchased goods in supermarkets in Buenos Aires, the capital of Argentina. Xinhua News Agency (Photo by Martin Sabala)
Associate researcher Gao Qingbo, the Institute of Social Development Strategy, Chinese Academy of Social Sciences, said that in the past half a century, Argentina has caused two serious debt crises due to the rapid accumulation of foreign debt, which has triggered a comprehensive crisis in finance, economy, politics and society.
After the debt crisis of 1982, it took Argentina 10 years to recover from growth. After the 2001 debt crisis, Argentina was forced to leave the international financial market. Moreover, a considerable portion of Argentina's high debt is spent on social welfare expenditures and has not become a supporting force for economic development.
Gao Qingbo said that the economic chaos caused by Argentina's economic structure and economic policies have formed the soil for populism, and populism and electoral politics have profoundly influenced the choice of economic paths. Populism, electoral politics and economic chaos are intertwined, leading to a long-term deviation between Argentina's economic and social policies. Can
get through the cold winter? The pro-market center-right Macri government came to power at the end of 2015. He followed traditional economics concepts, abolished foreign exchange controls, reduced government deficits, controlled inflation, and tried to revitalize Argentina's credibility in the international capital market. The center-left Justice Party (Peronist Party) emphasizes that capital serves the national economy, pursues social welfare, advocates the harmony of labor and capital, and safeguards labor rights and interests.
On August 14, pedestrians walked on the streets of the commercial district of Buenos Aires, the capital of Argentina.Xinhua News Agency (Photo by Martin Sabala)
In this election, many voters chose Fernandez, the center-left, in fact, to cast a "punishment vote" against Macri. Fitch International Credit Rating Co., Ltd. expects Argentina's economic recession to decline by 2.5% this year, and data from the Argentina central bank shows that the annual inflation rate is as high as 54.4%.
Fernandez refused to accept the "prescription" prescribed by the International Monetary Fund for Argentina, and issued an announcement accusing the current government and the organization of taking responsibility for the current economic and social dilemma of Argentina.
Argentine media predicts that the country is only "one step away" from the ninth debt default in history. At present, one of the most direct risks facing Argentina is that the International Monetary Fund may temporarily suspend the issuance of the sixth loan originally scheduled to be in place around September 15, with an amount of US$5.42 billion. In June 2018, the International Monetary Fund agreed to issue loans totaling US$57 billion to Argentina, with five previous payments totaling US$44.5 billion.
However, compared with 2001, the current macroeconomic situation in Argentina has not deteriorated to the brink of collapse. For example, when the Argentina financial crisis broke out at the end of 2001, the country had experienced three consecutive years of economic recession, and the current economic recession has only lasted less than one and a half years; for example, in 2001, 80% of Argentina's debts were to be reorganized, and now less than 30% need to be reorganized. In addition, in 2001, the Justice Party was an opposition party, organized a large number of strikes and street demonstrations, which affected normal economic life. At present, the Justice Party has the advantage in elections and will not resort to street politics.
In any case, due to the high uncertainty of Argentina's political and economic policies, Argentina is still in the process of presidential elections, and the financial market may continue to fluctuate. Regardless of the outcome of the election, the new government will face huge debt pressure.
High foreign debt, low foreign reserves, high inflation and other problems are stubborn problems in the Argentina economy. At the moment, I just hope that the Pampas eagle will survive this winter safely.
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-