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ECONOMY | 05-08-2020 00:31

Support – and silence – from opposition economists in wake of debt deal

Luis Caputo the most effusive in celebrating the government's deal with creditors, while Hernán Lacunza and Lucas Llach also express support. Alfonso Prat-Gay, the former official who was most critical of the deal, leads the criticism.

Former Finance Minister and Central Bank governor Luis "Toto" Caputo was the most effusive in celebrating the agreement with the bondholders among economists aligned with ex-president Mauricio Macri, whose reactions mingled support, silence and complaints. Hernán Lacunza and Lucas Llach also hailed it, though Alfonso Prat-Gay (also a former Treasury minister and Central Bank governor) extended his criticisms of the negotiations to their outcome.

Once described as the “Messi of finances” by Macri and now defining himself as an “anti-grieta economist,” Caputo tweeted early Tuesday: “Great agreement! Congratulations to President @alferdez, minister @Martin_M_Guzman and all involved. Hoping this nightmare of the pandemic ends soon and that the process of economic recovery which the people need so much begins!”

Caputo’s career in public service had been preceded by being a trader for major international banks such as JP Morgan and Deutsche Bank, before being recommended by Prat Gay for entry into the Macri Cabinet but now the two economists hold contrasting opinions.

For the past month Caputo had already been endorsing the negotiating strategy of Economy Minister Martín Guzmán. "Acceptable exit yields for the creditors and in keeping with the country’s possibilities. A very good design of incentives, discouraging holdouts. A fair proposal which should invite a high participation," Caputo tweeted.

In contrast, Prat-Gay questioned Guzmán: "This was the fourth “final” proposal, promising to pay US$15 billion more than the first. Rather than a global precedent, a manual of how NOT to negotiate," he complained.

Following a period of silence regarding the agreement reached by the Alberto Fernández government, Prat Gay tweeted testily: "A better agreement could have been reached like Ecuador’s – faster, more interest rate relief, longer deadlines and more capital haircuts. But there we have it – with the agreement it’s not enough and without an agreement there’s no take-off."

"Now we have to place all the dialogue and all our energies in coming out of this painful recession," he lamented.

Approval

Other former officials of the Macri administration approved the outcome. 

"An equanimous and reasonable agreement," assured Hernán Lacunza, the economy minister of the last three months of the Macri presidency after serving María Eugenia Vidal’s Buenos Aires provincial administration in that capacity for almost four years, describing it as "necessary because the alternative to default was chaos and poverty." He explained: "No haircuts (solvency), low interest rates and deadline oxygen (liquidity). A starting-point, not arrival. The future depends on the road map. Without dogmas, consensus."

Inclined to dialogue, Lacunza is one of the few former Macri administration officials appreciated by Guzmán.

Lucas Llach, former deputy governor at the Central Bank and Banco Nación, tweeted: “Great news, a debt agreement with all on board, hope it’s confirmed.”

The economist Guido Sandleris, Central Bank governor in Macri’s last stages, also celebrated the settlement.

“The announcement of an agreement to restructure the debt with the three main bondholder groups is very good news,” Sandleris opined, adding: “It’s a step forward … reasonable and necessary for our country to advance in the construction of economic consensus, a more difficult objective to achieve in default.”

Nevertheless, he also slipped in a word of criticism: “The negotiating strategy chosen generated unnecessary delays (the government took refuge in the ambiguity of not presenting an economic programme and took its time initiating serious conversations with the creditors), which forced us to co-exist for many months with the uncertainty of default.”

The deal was sealed between the weekend and Monday night before being announced by the Economy Ministry at 3am on Tuesday morning via a communiqué whose text gave details of the arrangement between the government and the three main creditor groups tussling with Guzmán: Ad Hoc (comprising of BlackRock, Fidelity and Ashmore, among other funds), Exchange (Monarch) and the Argentina Creditor Committee with the understanding arriving after a lengthy deadlock in the negotiations – or so it seemed.

But the government and the three groups uniting the main funds with public bonds under foreign legislation resumed dialogue last weekend via Zoom. A Santa Fe businessman with a hot line to Gramercy fund manoeuvred in favour of a settlement and the agreement banished the spectres of default, enabling the government from now on to advance with restructuring local debt and the sums owed the International Monetary Fund.

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Andrés Fidanza

Andrés Fidanza

Redactor de política.

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