Significance
Speaking before Congress on February 13, Guzman said Argentina had the willingness but not the ability to repay debt. He proposed a gradual path to a balanced budget, to be reached in 2023. The speech, together with the compulsory reprofiling of local bonds earlier in the week, implies a shift from the government’s amicable approach to debt renegotiation.
Impacts
Debt talks will take longer than the government had expected.
Convergence to macroeconomic stability will be slow and fragile, unless there is progress on structural reforms.
Large write-downs will delay any return to capital markets and expose the country to new litigation with vulture funds.
Macroeconomic stability under
balanced‐budget
rules and
no‐income‐effect
preferences
