Argentina: A Perfect Storm?

On Wednesday 27 May, Canning House Associate Fellow Jill Hedges provided an update on Argentina's political, economic & social spheres as the country faced interwoven challenges including the Covid-19 pandemic & its ninth debt default.

Whilst Argentina appeared to have the coronavirus under control, questions have been raised regarding what might happen once quarantine measures are eased – with little certainty around the impending challenges of restarting the economy and society after lockdown.

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Event Summary

Canning House Associate Fellow Jill Hedges offered a comprehensive overview of Argentina's current circumstances, from the country's handling of Covid-19, to its economic and debt situation, and the challenges ahead for President Alberto Fernández - all of which are interwoven with one another.

Whilst the coronavirus pandemic has seemingly been handled well by Argentina thus far, there are signs of fraying at the edges of the strategy - with protests against the country's lockdown, a significant uptick in cases following an attempt at easing of quarantine measures, and no certainty of a rapid economic recovery once the crisis has abated.

Despite Argentina's recent default on a portion of its debt, Jill offered a cautious optimism for the possibility of restructuring. Nevertheless, fears of deeper recession, as a result of Covid-19, mean a pragmatic approach is required, and it is likely the IMF will take a hard, if realistic, line on repayments. Pinning hopes on the Vaca Muerta - described by Jill as "a red herring not a dead cow" - may be unwise given the high expense and difficult environment for large-scale investment.

Looking ahead, if Alberto Fernández wishes to hold on to his high approval ratings, with an eye on next year's mid-term elections, Jill suggested that the his government's grip on the Covid-19 crisis, and its aftermath, remains important. Fernández has not been seen as to blame for Argentina's current struggles, but once the country emerges from crisis this positivity may begin to unravel.

On the international stage, the pragmatic approach taken by Fernández means little is likely to change in the short term in Argentina's regional or global relationships. On the UK in particular, while there exist few barriers to UK investment in the country, for Jill the viability of a trade agreement seems questionable.

To break its cycle of economic difficulties, Jill emphasised the need to investment in the Argentine education system to secure long-term change. The Covid-19 pandemic has bought some time to ignore such an approach, but short-termism must be overcome in order for the country to thrive.

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LatAm Outlook

Published in March, our LatAm Outlook report offered a look forward to the forces shaping the next five years and beyond in Latin America.

Our contributors felt Argentina, of all the countries covered, was the one with the most difficult path ahead to predict.

Read the full report here

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