Economy Politics

Coronavirus pandemic now hitting Argentina and region

12th March 2020

By Ignacio Portes

Coronavirus pandemic now hitting Argentina and region

The coronavirus pandemic is finally hitting as an unavoidable reality. With major countries seeing the number of cases rise exponentially and overwhelm their health care systems, world leaders have now turned the fight against the virus into their number one priority, with travel bans, quarantines, free testing and other emergency measures decreed across the globe.

When compared to how advanced the detected levels of contagion are elsewhere, Argentina’s figures might not have looked as alarming at first sight, with 31 cases and 1 death in total. But after an initially lax reaction, similar to that of Europe before the rapidly accelerating nature of the problem became evident, Argentine policymakers now seem to be slowly turning the ship, with large bans on travel and public events starting to roll in.

“I thought (the virus) would come to Argentina later, that is the truth,” Health Minister Ginés González García admitted before TV reporters earlier this week, explaining that the warmer Southern Hemisphere weather was at first seen as a factor that could mitigate the risks.

Turning the ship around

A woman’s day rally on Monday, football matches with packed stands celebrating Boca Juniors latest league title on Tuesday, and even President Alberto Fernández himself insisting on teaching his usual class on criminal law at the University of Buenos Aires yesterday seemed like signs that Argentine society and its political leadership were continuing their lives as normal despite worsening conditions worldwide.

But things have changed over the last few hours. The government, whose discourse had so far centered around civil liberties, not panicking and focusing on other important diseases such as dengue (a tropical fever transmitted by mosquitoes), now seems to be slowly catching up to the severity of the tone that Europe and the US have adopted recently.

“Individual responsibility is key, and we appealed to that responsibility, but we have now learned from cases such as that of a man who came from the US showing symptoms and still went to work for 6 days straight while having a fever. Evidently some people do not understand what is going on, so we have moved on from asking for responsibility to demanding it. Those who violate quarantine restrictions will see criminal cases opened against them for propagating an epidemic,” Fernández said earlier today.

Lessons from Europe

As well as forcing travelers from risky countries to be held in quarantine for two weeks, the government announced that no more of them would be coming in, as all flights from China, the US, Europe, South Korea, Japan and Iran were banned for the next 30 days. In addition, a cap on prices for basic medical and hygiene products, the creation of new intensive care units and the distribution of testing kits around the country were also mentioned by the national administration.

In Buenos Aires City, Mayor Horacio Rodríguez Larreta cancelled public attendance from sporting events, suspended all music shows, and ordered the closure of museums and other public activities, effective from today. According to the City’s Health Minister Fernán Quiros, there are currently 12 confirmed cases in the country’s capital, but 140 other people are under observation after being in contact with them.

Although Buenos Aires City has been the main focus of attention, coronavirus has already spread to several other Argentine districts, with cases in Buenos Aires Province, Chaco, Río Negro and San Luis as well. A case in the neighboring nation of Paraguay was also ultimately traced back to Buenos Aires, and four new cases not linked to travels abroad were detected in Argentina today, suggesting that the much more dangerous community spreading process is already under way in the country.

With daily developments accelerating, more drastic measures such as cancelling school and universities are also being considered.

“It would not be a good idea if, after the lessons we learned from Europe, we still waited to have many local cases before starting to act. We need to step in way before we reach Spain’s 2,000 cases or France’s 1,000. As soon as we see community spreading of the virus, the closure of schools would be advisable,” infectious disease expert Eduardo López said yesterday.

Finance and economics

The virus has now finally managed to take Argentina’s economic crisis and debt renegotiations from the front pages of local newspapers, but Casa Rosada is insisting that Economy Minister Martín Guzmán’s debt renegotiation schedule will be mostly unaltered. An offer to bondholders is said to be coming in the next few days, and a deadline to accept or reject it should follow near the end of the month.

The government says the only delay so far was in the hiring of intermediary banks, but that should at most mean that negotiations are a week behind the initial plan. Guzmán is willing to discuss terms through conference calls even it international travel is now out of the window.

But the circumstances in international finance have changed dramatically over the last few days and weeks.

The slowdown in China and the oil conflict between Russia and Saudi Arabia had already affected Argentine bond and stock prices last week. The spread of the disease through the west, with fears of a global recession now widespread, has added new risks to the re-negotiation.

Guzmán believes it is important to stop Argentine bonds from losing too much value in secondary markets, as it is known that so-called “vulture” funds usually step in when they are trading at 20 to 30 cents to the dollar, buying them during times of high stress to then sue countries for full payment instead of settling during restructuring negotiations. With the price decline seen in the last few days, Argentine bonds are now trading at around 35 cents to the dollar, close to the range that “vultures” favor to step in.

Renegotiation is not the only thing that is getting more complicated by the hour for Argentina’s economic team: recession is now likely to be unavoidable throughout 2020, as supply chains get paralyzed around the world and also in Argentina due to coronavirus worries.

Region in trouble

After trading around 450 points throughout Alberto Fernández’s first three months in charge, the Merval benchmark stock market index plummeted to a low of nearly 300 points today, in line with the global crisis. Argentine firms are now worth one sixth of their 2018 value, and the country’s debt-to-assets ratio is looking even more unsustainable.

Away from the headlines, neighboring Brazil is also seeing a dramatic decline of its own, with stocks losing 50 percent since the start of the year, and now trading at prices comparable to those seen during Dilma Rousseff’s impeachment process. As explained last week in The Essential, the real has also continued to decline, reaching the psychological landmark of 5 per dollar earlier today.

With Latin American currencies rapidly depreciating, the Argentine peso will be facing renewed pressure to follow suit soon, despite restrictions on dollar purchases which have helped prop up its value in the short term.

Ignacio Portes

Ignacio Portes is The Essential's General Editor. Former Economy editor at the Buenos Aires Herald, he has also written for publications such as Naked Capitalism, NSFWCorp and Revista Debate.