Argentina to extend coronavirus lockdown
April 8, 2020 |
President Fernández says he may allow some businesses to reopen to limit the economic fallout
Editor's note: LatinFinance’s Daily Brief newsletter is making some of its most important coronavirus-related material freely available to all readers. Visit our coronavirus section for all our coverage and sign up to receive the Daily Brief email in your inbox every morning.
Argentine President Alberto Fernández said he plans to extend a lockdown of the economy beyond April 12 to try to limit the spread of the deadly novel coronavirus, but he may allow some industries to reopen.
“We are not going to end the quarantine,” he said late Monday on the cable news network TN. “What we have to see is what kind of activities we are going to make flexible.”
Argentina was the first country in Latin America to shut down the economy to contend with the health crisis, ordering the 45 million population to stay at home from March 20 and only go out to buy essentials like food and medical supplies. Fernández has said that he is putting protecting people’s health over the economy and restructuring more than $100 billion in debt to avoid default, a process that he has said has been delayed by the COVID-19 crisis.
On Monday, Argentina said it postponed payments on $9.8 billion in local-law, dollar-denominated bonds until December 31 at the latest, a move seen as gaining time to restructure $83 billion foreign-law bonds.
Argentina's 4.625% 2023 US dollar-denominated bond fell 1.5 points to a bid price of 30, on Tuesday. The the 5.875% 2028 bonds fell 1 point in price to bid 28.10, according to MarketAxess via data provider Refinitiv.
The goal of the stay-at-home order is to keep an surge in cases from overwhelming the health system, gaining it time too to increase the number of beds and respirators to meet an expected peak of cases at the end of April or by mid-May. The number of confirmed cases reached 1,628 with 56 deaths from COVID-19 on Tuesday, up from one confirmed case at the start of March, according to the Johns Hopkins University’s Coronavirus Resource Center.
“We’ve made an enormous effort and we cannot lose this,” he said of limiting the infection rate.
By comparison, Brazil, Chile, Ecuador, Peru, Mexico, Panama and the Dominican Republic have more cases than Argentina, according to Johns Hopkins.
Fernández said schools, which have been closed since March 16, won’t reopen just yet, saying this will limit the number of people using public transport.
“We must make sure that the movement of people on the street and in transport is minimal, otherwise the risk is very great” of contagion, he said.
A drawback of the shutdown is that the country’s economic prospects have worsened, with economists saying that it will shrink 4.3% this year, far worse than the 1.2% contraction that had been expected before the measure, according to a March survey published by the central bank on Monday. Goldman Sachs estimates the economy will shrink 5.4% this year.
The impact of the shutdown is evident, with the normally bustling sidewalks quiet and grass growing up through the cobbles on residential streets. The plazas, locked shut, are overgrown. A plumber wearing a face mask said he hasn’t had a job in two weeks and hopes to land one soon because his savings are running thin.
Businesses are faring as poorly, with mass layoffs hitting the headlines as companies that had already been struggling in an economy in its third year of recession seek to cut costs as sales decline.
Ribeiro, a chain of more than 80 home appliances stores, has fallen into default, so too a small oil producer in the south, Echo Energy. Home appliances retailer Garbarino had already gone up for sale ahead of the lockdown, and Vicentin, the country’s biggest soybean exporter, had filed for bankruptcy.
"We have to try to recover our lives little by little,” Fernández said, warning that if the shutdown is lifted too soon the infection rate could surge. “The more we extend the quarantine, the more time we will have to equip ourselves to attend to the peak of the epidemic,” he said.
The economists surveyed by the central bank are optimistic about a quick recovery of the economy, saying it should start to rebound in the the second half of 2020 and grow by a more-than-expected 3% in 2021. That’s up from a previous forecast of 1.7% growth in 2021 made in February.
London-based Capital Economics is not so sanguine. It warned that the country’s debt crisis and now the health crisis is bound to shrink the economy 5% this year and limit the pace of recovery. It warned in a note to clients of “distortionary policymaking” in the wake of health crisis could slow efforts to bring inflation down from a most recent peak of 54% at the end of 2019.
Nikhil Sanghani, an economist at Capital Economics, said that the country’s wealth of shale oil resources, largely untapped, and its large agriculture output won’t provide a tailwind for growth, given that the prices of these commodities are likely to remain low as the global economy rebuilds after the health crisis.
“Argentina’s external position will remain vulnerable for some time,” Sanghani wrote. “With so many challenges in the near and medium term, it’s feasible that Argentina is mired in a crisis for much of this decade.”