BUENOS AIRES - A collapse in Argentina’s peso currency this week and soaring borrowing costs have fueled investors’ concern that Latin America’s third-largest economy is heading for another debt restructuring.
“The IMF probably will request a restructuring. The question is when,” said Edward Glossop, Latin America economist for Capital Economics. “Given what the market has done this week, it’s hard to argue that Argentina’s debt is still sustainable.” But he overestimated his ability to attract the foreign direct investment needed for sustainable economic growth and underestimated the effect his plan for cutting public utility subsidies would have on inflation, now roaring at 55%.
“In general the Fund acts to avoid defaults. So if the IMF could put in an extra $5 billion or $10 billion it would not be much money, but it would help avoid a painful default,” said Gabriel Rubinstein, a Buenos Aires-based economics consultant.Shamaila Khan, who manages portfolios exposed to Argentina as director of emerging market debt at AllianceBernstein in New York, said Argentine bonds were trading at 40 to 50 cents on the dollar.