Sep 3, 2019

Argentine president leads economy to debt, inflation and mass poverty

Argentine President Mauricio Macri. Photo: Mario De Fina/NurPhoto via Getty Images

Argentine President Mauricio Macri has essentially returned the country to what it was under former Peronist President Cristina Fernández de Kirchner, just in much worse shape.

The backdrop: Macri came to office as a center-right market pragmatist in 2015 riding a wave of investor enthusiasm and pledging to unleash the economy after years of government intervention, like capital controls, that it had seen under Kirchner.

He issued billions of dollars in new sovereign debt, including a 100-year bond investors at the time said was largely the result of hubris, and is now looking to write off some of that debt in a process his administration has termed “voluntary reprofiling” that's eerily similar to Kirchner's proposals.

  • During his presidency, inflation has skyrocketed, poverty has increased and the economy has been mired in recession for 3 of his 4 years in office.
  • The peso, trading at around 13-to-1 with the U.S. dollar when his term began, now trades at around 60-to-1.

What they're saying: “Argentina is in a virtual, hidden default," leading presidential candidate Alberto Fernández said in response to the government's measures and market's reaction.

  • Last week, ratings agency Fitch concurred, cutting Argentina's debt ratings to RD (restricted default).
  • Credit default swaps are pricing in more than a 90% chance of a full default within 5 years.
  • Argentina’s sovereign bonds are now trading below 40 cents on the dollar, around the level associated with default.

Go deeper: Argentina's "Macrisis" continues despite its surging stock market

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The specter of global disintegration

Illustration: Sarah Grillo/Axios

It's the end of the world as we know it. The world is disintegrating, and much of the highly visible noise and chaos is a symptom of a much deeper problem.

Driving the news: In Hong Kong, millions of demonstrators are taking to the streets in a desperate attempt to preserve their democratic freedoms. In Argentina, the government has been forced to implement capital controls to prevent money from fleeing the country. In Britain, incoming Prime Minister Boris Johnson has lost his majority, his long-coveted control over legislation, and even his attempt to call a new election. Brexit uncertainty has never been greater.

Go deeperArrowSep 5, 2019

Recession fears are making companies more responsible

Photo: Getty Images

Fears of a global recession are scaring U.S. companies, pushing them to use excess capital to reduce debt and add to cash reserves, rather than levering up and making risky bets as they have in the past.

Why it matters: This newfound corporate responsibility, motivated largely by fear, could help insulate the economy from another damaging recession.

Go deeperArrowSep 5, 2019

Peloton CEO John Foley on post-IPO falling stock price

Illustration: Sarah Grillo/Axios

Peloton CEO John Foley told Axios on Thursday that he isn't too concerned about how the connected fitness company's share price has fallen sharply in its first day of post-IPO trading.

"I'm following it like everyone else, but trying not to take it too personally or getting too discouraged after a couple hours of sideways trading. Obviously, we'd rather have it going the other way, but I don't think it's a reflection on our fundamentals or the excitement of investors who came in. This is a long journey."
Go deeperArrowSep 26, 2019