Argentina 2019
If elected, Alberto Fernández will face USD 23.4 billion of maturities within his first five months
The Peronist candidate will have to renegotiate the debt in record time to avoid a new Argentine default. His team hopes to inspire enough confidence to lower investment risk and roll half of the Government's notes.

If his historic primary election triumph is confirmed in the October general elections, Alberto Fernandez will not have a single day to celebrate. The Peronist candidate will have to address immediately with his economic team a debt renegotiation in record time to avoid Argentinean nineth default.

Within the first five months of his eventual presidential term, Fernández will face financial needs of about 23.4 billion dollars, and a special glut in April and May, where some 7.731 billion and 6.891 billion, respectively, will mature, according to ACM estimates. This includes bonds and, notes´maturities, debt interest, payments to international organizations, and deficit financing.

This reduces the margin available to reach a voluntary agreement with bondholders to solve these commitments in time if he want to elude the tortuous path of 2001, hand in hand with the vulture funds. As LPO anticipated, there are already 13 banks working on reaching 75% of the bondholders adhesion, a magic number that leaves out any pretension of the vulture funds t trigger collective action clauses.

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"An eventual Fernandez government should sit down and negotiate as soon as possible to take pressure off the 2020 funding. If market conditions are acceptable, it could be achieved quickly. The most complicated part are the maturities in local currency; it will be necessary to reach an agreement with creditors or will have to resort to other financing tools, such as issuance," Lorena Giorgio of Econviews told LPO.

According to members of the Peronist own team of experts, these negotiations usually last about six months, but given the circumstances they will try to accelerate the process. At the same time, they will try to instill enough confidence to lower the bond index (EMBI) and be able to return to the local capital market.

The vultures circling Alberto

"There is no need to reach a final agreement to lower the bond index. When investors see that renegotiation is progressing under the umbrella of the IMF, with a President capable of making decisions and with a good fiscal and financial program, Argentine assets are going to become very attractive," sources said from the ranks of Peronism.

But in order to access funding in the local market, Eco Go Consultancy argues that the JP Morgan index should drop to 800 basic points and, for foreign legislation bonds, it should be contracted below 600 bp, figures that are not attainable in the current environment.

"In order to lower the index, reopen the market and get the bondholders to accept the re-profiling proposal, Alberto will to need to inspire confidence with a consistent monetary and fiscal program and an agenda of structural reforms. The economy will leave no room to finance populism. To achieve growth, dollars are a must and, in order to gain them the capital market ought to be reopened because the forex rate is not enough," remarked Federico Furiase to LPO, Director of that entity.

Even in an optimistic scenario (total disbursements of the IMF and a rollover of Government Notes of 50%), in ACM Consultats they estimate that new issues of debt for 19,800 million dollars will be needed.

"Alberto has no time to reach an agreement. Lacunza's re-profiling blocked all chances of returning to the international markets and the outlook seems pretty bleak. Either they refinance quickly on a voluntary basis or they end up in default," added financial analyst Christian Buteler. 

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