December 11, 2019 / 7:20 PM / 2 months ago

Argentine markets brace as new Peronist government readies economic plan

BUENOS AIRES (Reuters) - Argentine markets held steady on Wednesday, waiting for policy signals from the newly inaugurated government of center-left President Alberto Fernandez and his top economic team after conservative Mauricio Macri handed over power this week.

Argentina's Economy Minister Martin Guzman attends a news conference in Buenos Aires, Argentina December 11, 2019. REUTERS/Mariana Greif

The peso ARS=RASL, whose freefall has been kept in check by currency controls imposed in September, ended flat, while over-the-counter bonds rose slightly. The country's S&P Merval stock index .MERV was also unmoved.

Argentina’s new economy minister, 37-year-old Martin Guzman, was expected to start laying out plans for the country’s wobbly economy in a press conference at 7 p.m. (2200 GMT) on Wednesday.

The latter stage of Macri’s rule was plagued by recession.

“The uncertainty which we have lived with in recent months should begin to clear,” local brokerage Portfolio Personal Investment said in a note.

Argentina is facing tough restructuring talks with creditors over a looming pile of debt repayments, including to the International Monetary Fund (IMF) which agreed to a $57 billion financing deal with Macri in 2018.

An IMF spokesman on Wednesday said Guzman had met with the fund’s head, Kristalina Georgieva, in Washington prior to the new government taking office this week.

Fernandez met U.S. State Department official Michael Kozak in Buenos Aires on Wednesday, who repeated that the United States would “support” Argentina’s negotiations with the IMF, according to an Argentine government readout of the meeting.

DEBT SITUATION “DELICATE”

Axel Kicillof, a leftist economist who took over as the governor of Buenos Aires province, Argentina’s largest, said in a speech the local government did not have enough funds to cover all its debt obligations while paying its bills.

Buenos Aires has been a major issuer of debt, including to overseas creditors, who see the province as a test case for how Argentina will be able to deal overall with talks to restructure around $100 billion of debt amid fears over a default.

“The province wants and has the will to fulfill its commitments, but it needs to have a sustainable debt structure. The financial situation of the province is delicate,” Kicillof said in a speech in the city La Plata.

Peronist leader Fernandez was sworn in as president on Tuesday, marking a shift to the left for Argentina, Latin America’s No. 3 economy, as the country fights rampant inflation, credit default fears and rising poverty.

Argentine bonds have risen this week, a signal of investor hopes that the new administration will take a positive approach to talks about restructuring its debt.

The new government will likely look to cut high interest rates, currently above 60%, which are set by daily central bank auctions of short-term “Leliq” notes, which had gone out of fashion with banks ahead of the new government’s arrival.

A second daily Leliq auction on Wednesday failed, traders told Reuters, the first time since October last year.

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Reporting by Walter Bianchi and Adam Jourdan; Additional reporting by Gabriel Burin; Editing by Richard Chang and Tom Brown

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