Say return to financial markets outweight costs Tuesday, March 1, 2016 Economists praise agreement

Say return to financial markets outweight costs

Tuesday, March 1, 2016

Economists praise agreement

Economists from different theoretical backgrounds yesterday hailed the preliminary deal between the Argentine government and holdout creditors, but stressed the move was only the first step towards solving macroeconomic problems in the country.

Speaking to the La Nación daily, most experts considered that the government prioritized the need to quickly return to financial markets over trying to obtain a bigger haircut.

— Miguel Bein (adviser to Daniel Scioli during the presidential campaign): “I’ve been saying since August last year that a 25-percent haircut was a reasonable measure to put an end to an issue that was hurting the country’s economy. The deal is positive, especially if the new loans are used for infrastructure works which may enhance the country’s export capabilities. In the short term, these funds will be used to finance part of the fiscal deficit (but) in order to attract investment, businesses will be needed too.”

— Roberto Frenkel (former Economy vice-minister): “This is a sucessful, very important step. It was the first thing the country needed to solve in order to be less isolated. This will decrease the interest rates the country pays to issue debt by five or six points ... but it doesn’t solve all the country’s problems. There are still financial and exchange rate issues, since interest rates are not enough to discourage the purchase of dollars. The dollar is expected to go up by 30 percent.”

— Matías Kulfas (former Central Bank general manager): “The domestic economy is in a complicated position. There is no sign that the four-year recession will be reversed in the short term. The only strong bet the government can make is to move forward with public works and in order to do that the national administration needs external financing — that’s why they are rushing to clinch a deal. The deal is a positive move to get money, but it was made in a short period of time.”

— Eduardo Curia (former Economy vice-minister): “It’s very important that the country puts things in order in this field. I want to go beyond the debate over the costs: sealing a deal is a key thing to do because it gives the government more leverage... Today, the government can celebrate.”

— Daniel Marx (former Finance secretary): “I believe that once the fine print comes out, people will come out and comment whether they believe the move was expensive or cheap for the country. But the situation is difficult for emerging countries such as Argentina, and this will ease the pressure. The question now is how much debt the country will issue over the next year. I think it will be above US$20 billion.”

Herald with online media