Argentina’s latest bond auction failed even after offering 69% interest, i.e., they were only able to roll 61% of their debt. IMF has been pumping money into this country but there is no solution.
Argentina in 2017 issued 100 year USD bonds, and overall it has over 275 billion USD external debt. Any case, Argentina is walking towards a default. Given the size of its external debt, expect some tremors in global equity/ bond markets.
Maybe the solution is to stop pumping money into it? Worth a try.
Is this a global bond market house of cards? What other nations will follow suit?
Global bond market, especially US treasury market is pretty deep. $275 B is something it can easily absorb. The issue is often these kind of debt are owned by Hedge funds with significant leverage and cross collateralization.
At this time I don’t know who else could be affected. One nation I was watching was Pakistan, but US administration flexed its muscles and ensured IMF releases funds to them and provided some aid. While USAID was decimated, and money for various humanitarian, medical, food aid’s are cut, Trump administration ensured military aid to Pakistan. So they are no longer on my watch list.
Heh, and just six months ago people here were singing their praises for having a good quarter of GDP and lower inflation.
That was a very good response, but we should expect it is a house of cards.
Better than the reverse, no?
At any rate, last month from the OECD…
The economic recovery now seems firmly underway and is expected to gather momentum in 2025 (Table 1). GDP is projected to grow by 5.2% in 2025 and by 4.3% in 2026. The removal of most currency and capital controls in April 2025 will support further improvements in economic sentiment and investment.
Table 1: A strong economic recovery is underway
https://www.oecd.org/en/publications/oecd-economic-surveys-argentina-2025_27dd6e27-en.html
DB2
Like asking if being stabbed in the gut is better than shot in the back. So, ya definitely better.
Many times these kind of reports leave me wondering… the inflation is 47.3%, the argentina treasury bill rates (i.e., ones that mature in 31 days) are 29% . A 5% GDP growth is great in a stable inflation environment, a la India, the dead economy. If someone is cheering the 5% GDP growth but largely ignores the inflation, how objective are they?
Real GDP growth, year-over-year was 5.9%.
DB2
Yes, I understand the real GDP including inflation. But, when you have inflation at such high level, growth is irrelevant.
How so? The growth is after inflation. The economy is still producing more goods and services.
DB2
When inflation is as high as 47%, the purchasing power is severely eroded. The GDP growth means in general it improves people’s purchasing power, wage growth, etc. But in a very high inflationary environment, the real growth often achieved by some small part of the economy doing much better than all of the economy, thus leaving behind most of the economy and people.
The best example is look at the wage growth rate, which is around 20%, whereas inflation is 47%. Do you really think the GDP growth is flowing down to the people?
The OECD report says that “While poverty rose during 2023 and the early months of 2024, it has since declined markedly as inflation has come down, falling to levels below those observed in 2022.”
I didn’t find anything on real wage growth this year, but last year (2024) wage growth was higher than inflation.
So, last year’s real wage increase was
2.455/2.178 = 1.12
A 12% real wage increase is pretty good.
DB2
I don’t trust Rio Times.
When you are offering 69% interest rate and still not able to roll your debt tells me all I need to know. If the GDP is growing, inflation is coming down, there should be enough risk capital to take 69% interest rate, but not.
I am sure, as much as you argue about Argentina is doing okay, I assume you are not rushing to buy Argentina debt or equities. If you do, good luck.
Do you have links to other sources than the Rio Times (and, tangentially, the OECD which says poverty rates have dropped)?
DB2
There are central bank reports and US Fed reports. Also, make sure you are not using data from 2 different years.
Thanks for the conversation, but I am spending too much time on a topic that I have very small interest. So I will stop with this.
The rates may be stated as 69% but that is impossible to achieve. Where is the return supposed to come from? The government inherently must be cycling money through the central bank….but Argentina gave up their currency for the USD. Something is very wrong. Nothing about any of this is Kosher.
Argentina would have to counterfeit USD. If only by adding zeros in computer accounting columns.
Bernie Madoff was more honest than this.
Bob, why are you neck deep in lying sources again?
No. People use the dollar because it keeps it value, but the currency is the Argentine peso (ARS).
DB2
He did not keep his promise. Ofw