Graphic: How much has debt grown, and who is it owed to?

5th December 2019

By The Essential Staff

Graphic: How much has debt grown, and who is it owed to?

As analysts, investors and Argentines in general await for President-elect Alberto Fernández to name his economic team this Friday and start clarifying how his administration will deal with a piling amount of bond maturities that look all but unpayable, focus has turned to the legacy left behind by the outgoing Mauricio Macri and how it might condition the incoming government.

In the chart below, part of a wider report on Argentina before the transition, the MacroView consultancy agency compared the debt legacy of the last five administrations and broke down the different pain points left to their successors.

</p> <img class="wp-image-5976 aligncenter" src="" alt="This MacroView chart breaks down the different types of Argentine debt and its evolution since 2001" width="657" height="624" srcset=" 300w, 1024w, 768w, 600w, 1200w" sizes="(max-width: 657px) 100vw, 657px" /> <p>Overall, the gross debt inherited by Fernández will amount to 90 percent of Argentina&#8217;s GDP, almost twice as much as what Macri received in 2015. That figure is somewhat misleading, as part of that difference can be explained by the large <a href="">exchange rate lag</a> left behind by Cristina Fernández de Kirchner&#8217;s presidency, which makes GDP overvalued in an unsustainable way. But the debt undoubtedly grew, with the country now owing 80 billion more in total when compared to 2015, and 120 billion more when intra public sector debt is excluded, a staggering 135 percent rise.</p> <p>Intra public sector debt actually decreased by 19 percent during Macri&#8217;s administration, according to MacroView&#8217;s estimates, meaning that part of the debt raised abroad was used to prop up the damaged balance sheets of Argentina&#8217;s Central Bank or its ANSES social security administration. But although a reduction in this liabilities in undoubtedly positive, debt analysts sometimes exclude them from their calculations regarding payment sustainability, as state organisms are always likely to accept re-financing proposals from the Federal administration, as opposed to private bondholders or multilateral credit organisms.</p> <p>The 220 billion owed to the latter two groups are the main source of worry of Fernández&#8217;s debt re-negotiating team. Although repayment to the IMF would only kicks off in the last year of Fernández&#8217;s government, private bondholders are owed tens of billions in maturities expiring in 2020 alone. This is why, overall, analysts expect Fernández&#8217;s debt negotiators to propose a time extension in order to avoid unilateral default.</p> <p>Although the debt inherited by Fernández&#8217;s presidency will still be smaller than what Argentina had to pay back when he took office as Néstor Kirchner&#8217;s cabinet chief in 2003, one crucial difference separates both situations: the country was already growing strongly back in 2003 following the massive 2002 devaluation and bank bail-ins, something that&#8217;s unlikely to be the case in 2020.</p> <p>

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The Essential Staff

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