Macri’s debt-fueled bubble bursting after election defeat
President Mauricio Macri’s dangerous debt-fueled bubble seems to be finally exploding, and the consequences are only starting to come to the light. Argentina could be facing its hardest crisis since 2001, when it suffered the worst recession in the country’s history.
The crash came after Macri’s defeat to Alberto Fernández on Sunday’s presidential primaries. During the campaign, Fernández said he would not default but suggested a (voluntary) re-negotiation of the country’s piling debt-maturities after 2019, as well as cutting the interest rates of the snowballing peso-denominated 7-day Central Bank Leliq notes.
Macri, on the other hand, prioritized keeping creditors happy, hoping markets would loan him the US$16 billion he needed to rollover debt, and cover new deficit in 2020, despite the sudden stop of loans seen after the 2018 crisis. In Macri’s view, investors could be lured through promises of harder austerity as well as pension and labor reform.