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Argentina is the third largest economy in Latin America, behind Brazil and Mexico. The economy is mainly based on primary goods and the agro-food industry which together represent 70% of exports. Argentina has large energy resources (e.g. huge shale gas reserves). Despite its substantial economic potential, the country has experienced severe crises in the recent past (in 2001, Argentina defaulted on USD 100 bn sovereign debt and again recently in 2019 on USD 66 bn sovereign international bond debt) and the country is characterized by strong growth volatility and high inflation mainly due to macroeconomic mismanagement.

Following presidential elections in November 2015, President Mauricio Macri had taken decisions to restore the country’s external liquidity and liberalise the economy. After a recovery in 2016-2017, the economy fell in recession again in 2018 due to negative external shocks and macroeconomic mismanagements. The economic situation kept deteriorating up to the October 2019 general elections. In a context of uncontrolled inflation and currency depreciation, the erosion of foreign reserves and the failure to roll over short-term bonds forced the government to i) impose an extension of the repayment of Treasury bonds under domestic law (including  bonds in USD imposed in late 2019 leading external rating agencies to downgrade the sovereign in the default category), ii) announce a re-profiling of its international bond debt and iii) tighten capital controls. Finally, the Macri government lost general elections and Peronists returned to power with Alberto Fernandez as President.

In 2020, the lockdown imposed by the covid19 outbreak took a hard toll on an economy already in recession for two years. The administration of President Fernandez confirmed in early 2020 its intention to restructure its long-term bond issued under both local and foreign law. And in September 2020, the government concluded a debt restructuring which will alleviate liquidity pressure in the near future. But the central bank had to tighten capital controls further to contain the drain on fx reserves. Moreover, the government got only a very marginal reduction in the face value of its debt. As a consequence, state’s solvency remains very fragile. An agreement with the IMF, currently under negotiation, is vital to bolster external liquidity and restore the state’s solvency.