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Corona’s impact hit Mariana Achaval when her restaurant was doing very well. She had expanded the “Alegra” bistro, which she runs with her partner in the trendy Chacarita district of Buenos Aires, and hired a sommelier and several waiters. “The restaurant is my life project,” says the trained cook.
Then the corona virus broke his business. On March 20, President Alberto Fernández imposed some of the strictest quarantine measures in Latin America:
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All airports are closed until September.
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Restaurants and shops had to close.
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The inhabitants of the Argentine capital can move a maximum of 500 meters from their place of residence.
“We were totally unprepared,” complains host Achaval. “From one day to the next we were without income.” At least the tough measures seem to serve their purpose. Argentina is in a better position to fight the virus than many of its neighboring countries. Citizens primarily attribute this success to the President:
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During the electoral campaign, many made fun of former university professor Fernández as the puppet of former president Cristina Fernández de Kirchner, who is now the vice president.
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But the Peronist so far has proven to be a crisis manager and statesman; Its approval rates are over 70 percent.
However, it is not clear if this will continue to be the case. Because Fernández must now handle one of the biggest economic crises in Argentine history. The global monetary fund estimates that gross domestic product will drop 5.7 percent as a result of the crown crisis. The consequences for gastronomy are particularly dramatic.
Buenos Aires has always been famous for its nightlife. No other city in South America has so many cafes and restaurants per square kilometer. In many restaurants you can order a steak at two in the morning. Now they are threatened with the end. Tens of thousands of waiters, cooks and restaurant owners need it.
The government ordered that permanent employees not be laid off during the crown crisis. The state pays them a minimum wage. “But that is not enough to survive,” complains host Achaval. Therefore, unions and employers are asking for extra help for the troubled economy. But state coffers are empty, and not just since the outbreak of the corona virus. Because in addition to the pandemic, the country is once again struggling with a debt crisis.
“Argentina was already bankrupt in February,” says Professor Ulrich Volz, director of the SOAS Center for Sustainable Finance at the University of London. “Now the pandemic has dramatically worsened the economic environment.” Exports in particular have plummeted. At the same time, spending to cope with the crown crisis has increased dramatically. Volz says: “The Argentine state has no margin to pay the debt.”
The middle class falls into misery due to the crown crisis
More than a third of Argentines were considered poor before the crown crisis. Now members of the middle class are falling into misery. Every morning, long lines form in front of the soup kitchens of private aid organizations. “Now to say that we serve the foreign debt first would be a political explosive,” says Volz.
Therefore, the government proposed to private creditors to restructure $ 65 billion in liabilities:
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The country wants to stop all school payments by 2023.
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The average interest rate will drop from seven to 2.3 percent.
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Unions and business associations have assured President Fernández of their support.
The deadline for an agreement is May 22. If debt rescheduling is not accomplished by then, Argentina will declare bankruptcy. It would be the ninth state bankruptcy in history.
No other country went bankrupt so often. “When Argentina issued new bonds in 2016, all investors must have been aware of the risk,” says financial expert Volz. And he adds: “The capital markets are forgetful.”
Many investors were blinded by the conservative then-ruling Mauricio Macri’s liberal economic course, especially since the world monetary fund had granted Argentina a new $ 1 billion loan. Volz says: “Growth forecasts were too optimistic.”
“Creditors are co-responsible”
President Fernández must now deal with the consequences. To boost the economy again, you have to solve the debt problem. He noted flexibility. “I think the government offer is a starting point for negotiations,” says Martín Daud of the Balanz financial firm, which deals, among other things, with Argentina’s debt.
Gigantic investment funds like Blackrock, Fidelity and T Rowe hold most of Argentina’s private debt. Daud sees this as an advantage compared to the collapse in 2001 when dark vulture funds attempted to sue Argentine state assets like ships and planes. “The mega funds are under enormous public pressure,” says Daud. Creditors “have joint responsibility for the Argentine debt crisis and should be involved in a solution,” says financial expert Volz.
So far, the funds have rejected the government’s offer, but it doesn’t have to be the last word. Because another state bankruptcy would be a fanatic for everyone. “If the health crisis worsens, many countries will find themselves in a similar situation to Argentina,” says Volz. “We need an international legal framework for debt restructuring.”
Meanwhile, President Fernández has signaled a relaxation of strict quarantine measures to ease the economic crisis. It is not yet clear when the owner of the Achaval restaurant will be allowed to reopen, but now he is hopeful, a bit.
