14 October 2020 by jbchevrel
Compared with previous stress episodes, Argentina CDS didn’t take long to trade back in distressed territory, post restructuring. The mid is close to 21% on our close. Argentina struck a deal to restructure $65B foreign debt in August, delaying next payments far into the future and effectively erasing $38B worth of debt. As local asset prices collapse, the gap between the official FX and black market FX is widening, and Argentina could see its 7th currency devaluation in 20 years. The last time a devaluation was done under a Peronist government was in 2014, and the amplitude was ~-25%. Argentina international reserves in USD fell by -$2.5B since the end of July. Bloomberg has them a tad below $41B as of 10/13. Thus why it is probable that Argentina’s central bank BCRA will be forced to tighten restrictions on imports and reset the peso (ARS) at a weaker value, from the current official 77 vs $. On the black market, it’s more than double that. So far the government’s measures to try to stop ARS from falling (tighter capital controls and lower taxes for the agricultural powerhouse’s soya exporters) didn’t prove successful. COVID was devastating. Argentina’s lockdown has been one of the longest and strictest in the world. It has just been extended once again to October 25.