Argentina in "virtual default", confirms its president Alberto Fernandez

Argentine Congress session during discussions on economic recovery laws, Friday December 20, in Buenos Aires.
Argentine Congress session during discussions on economic recovery laws, Friday December 20, in Buenos Aires. RONALDO SCHEMIDT / AFP

Argentina is in "Virtual default", its chairman Alberto Fernandez confirmed on Sunday December 22, two days after the financial assessment agencies Fitch and Standard and Poor’s thought the same thing.

"It's not the same as in 2001, but yes it looks like it", said the head of state in an interview with América TV. In that year, the country had plunged into the most serious economic crisis in its history after declaring itself in default on its public debt. "At that time we had a 57% poverty rate, today 41%. We had a debt that we were defaulting on, today it’s a virtual default. ”, he continued.

Buenos Aires delayed payment of $ 9 billion of dollar-denominated debt in August. Standard and Poor’s and Fitch lowered the rating for "RD" ("Selective default"). "This is what we inherit. We cannot face and pay the falling bonds ", lamented Mr. Fernandez, who took office on December 10.

This leftist president succeeded a liberal, Mauricio Macri, who failed economically completely, leaving a country plagued by recession and inflation. In 2019, GDP should have fallen by 3.1%, and prices should have increased by 55%.

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Do away with dollar savings

On Saturday, Congress passed an emergency economic law, effective Monday, which provides, among other things, for higher taxes for the middle and upper classes, social benefits for the most disadvantaged, and a 30% tax on purchases and other expenses in foreign currency.

"Argentina found itself without dollars, it has already happened"said Fernandez, who wants to discourage dollarization of the economy. "We have to end this practice of saving in dollars".

Traditionally, any economic crisis in the country has pushed the wealthiest to accumulate greenbacks, which only exacerbates the fall of the Argentinian peso and the difficulties of the economy.

"Argentina needs dollars to start entering again and for those dollars to become part of the state reserves, because otherwise it is impossible to contemplate meeting the obligations that the country has contracted", hammered the head of state.

Public debt amounts to some $ 330 billion, or almost 90% of GDP, including $ 44 billion from the International Monetary Fund.

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