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Argentina’s Pragmatic Economic Team Bodes Well for Outlook – Ashmore Group

Argentina’s president-elect revealed his new cabinet this week, a team that included Martin Guzman, a notorious IMF critic and debt restructuring specialist as Economy Minister – a move EM-focused fund managers at Ashmore took as a welcome sign.

Dec 13, 2019 // 5:36PM

Guzman, a former research scholar the Columbia Business School, has said the country would conduct talks with creditors in the hopes of scoring a quick deal with bondholders as early as Q1 2020 to delay debt repayments, primarily so that it can avoid immediate steep cuts to spending.

The year 2020 is not a year in which fiscal adjustment can be made. A larger fiscal contraction would deepen the recession and aggravate the problem,” Guzman told reporters at a press conference earlier this week.

In a client note, Gustavo Medeiros, a portfolio manager at Ashmore Group, a specialist emerging market investment firm, welcomed the appointment, and said the deal should avoid imposing a haircut on the debt but include a two-year grace period for interest and principal repayments.

“Argentina needs to rekindle growth in order to afford to service debt,” he explained.

“Fernandez appointed Felipe Sola as Minister of Foreign Affairs and Daniel Scioli as Argentina’s ambassador to Brazil. In addition to these key appointments, the Cabinet also includes people close to Vice-President Cristina Kirchner. However, the fact that pragmatic appointments have been made in the critical areas of government is welcome news for business sentiment and the prospects of a friendly re-profiling of the debt with the International Monetary Fund (IMF) and bondholders.”

The news comes as some green shoots start to emerge in the economy. Industrial production increased 5% on seasonally adjusted basis in October, following two consecutive months of contraction.

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