Argentina is the state broke?


On the result of the primaries in Argentina, the financial markets have responded dramatically. Stock markets and currency fell initially dramatically. The fear of a haircut that makes investors in the round.

In Argentina, a change of power has become more likely. This has led to the start of the week to heavy turbulence on the financial markets of the country. In the stock market the reviews of the company fell sharply, the benchmark index, the S&P-Merval broke on Monday in Buenos Aires by around 30 percent. In Dollar terms, the losses are even at almost 50 percent. It is the second largest crash of the stock market in the world since the 1950’s. Also, the Argentine currency, the Peso, crashed in the aftermath of the primaries in relation to the Dollar.

So investors have reacted to the financial markets on the surprisingly clear outcome of the presidential primaries. On Sunday the acting head of state, Mauricio Macri had a bitter rout. The primaries serve to Clean up the candidate field and they are considered to be important test for the actual presidential election in two months.

On Tuesday, however, the Merval Index recovered and was able to at least prevent further decline.

Incumbent Mauricio Macri and his Challenger Alberto Fernandez

The return of the Peronist most

Macri was left after counting of votes on Sunday, well behind his rival Alberto Fernandéz. Fernandéz comes from the Peronist center-left camp. And his comrade-in-arms and Vice-candidate is Argentina’s Ex-President, Christina Kirchner. You and Fernandéz came to 47 percent of the vote, while Mauricio were able to bring Macri and his Vice-candidate, only 32 percent of Argentina’s voters behind.

Thus, the probability is great that Fernandéz and Kirchner could do the same in the first round of the presidential elections. “Kirchner’s government at that time balance was not the best. And now the concern is for investors that the debt restructuring debate,” says Mauricio Vargas of Union Investment. Rescheduling is cut in this case, the polite euphemism of Debt, in which investors, at least part of their invested capital could lose.

Experience has, at least, Christina Kirchner with such plans. Because in their term of office, the fight against Bondholders who did not want to participate in the state restructuring falls. That’s why you were said to have been in contrast to Macri – a very strained relationship with foreign investors. “You can out of capital and investors can only hope that, metaphorically speaking, not in a bloodbath ends, in which the international investors about the blade jump,” says Mauricio Vargas.

Government of Macri in the vicious circle

Argentina is already since a long time in a severe economic crisis. Although is primarily associated with Kirchner’s presidency, the economic decline of the country. Your liberal successor to Macri but it has not in the past four years, to lead Argentina out of the economic valley.

In the past twelve months Inflation was around 40 percent, unemployment and poverty in the population increased. The economic liberal applicable Mauricio Macri had promised a change for the Better. “Macri has tried to change things,” says Mauro Toldo of the Deka Bank. “But he also has great make savings and this has had a negative impact on the economy.”

After two currency crises, the government Macri had requested in the past year, the International monetary Fund for a loan in the amount of the equivalent of 50 billion dollars. The money will serve until the end of 2021 to the stabilization of the country. In return, Macri austerity measures announced.

Risk of an increase in the national bankruptcy drastically

With the probable change of course of a possible new government and the drastic uncertainty in the financial markets, a possible state bankruptcy of Argentina is again in the room; but at least the likelihood is increased significantly. Read this to hedge against the default of Argentine state bonds.

Data provider Markit said on Tuesday that the protection of such bond packages has doubled since Friday, and the highest level in five years. This indicates that the probability of a state is broke quantified in the financial markets to over 72 percent.

“The debt is very high and you realize that the confidence of investors is available,” says Mauro Toldo. “That is to say, it comes very quickly in a very negative dynamic in the financing more difficult then. This may force the country to its knees. This need not be so. But at the Moment it looks that way.”