President Barrack Obama’s plan to visit Argentina underscores the fact that the United States has found a friend in Argentina’s new president Mauricio Macri, who appears to be doing everything he can to pull his country out of an economic quagmire.
“In Buenos Aires, the president will deepen efforts to increase cooperation between our governments in a range of areas, including trade and investment, renewable energy and climate change, and citizen security,” said the White House in a press release.
Soon after his election, President Macri, who was educated in the United States and a pro-business conservative, vowed to strengthen Argentina’s foreign ties. In the past one month, French President Francois Hollande and Italian premier Matteo Renzi have toured Argentina. Obama will visit on March 23 and 24 after a historic trip to Cuba.
The Obama administration has offered to support Macri’s with his efforts to end financial isolation and political enmity with Washington that Argentina suffered under Cristina Fernandez de Kirchner and her late husband Nestor.
Argentina is Latin America’s fourth largest economy, but a $100 billion default in 2001 made it a financial pariah, effectively shutting it out of international capital markets. Lack of foreign investment and ballooned subsidy cost widened the country’s fiscal deficit, draining public finances and driving up inflation.
Now, Argentina expects to pay about $6.5 billion to settle claims of about $10 billion by bondholders, including U.S. hedge funds. Analysts say Obama’s visit is likely to persuade these hedge funds to settle with Argentina. Settling with bondholders will certainly increase foreign investment in the South American country.
The Macri administration is laying the groundwork for a fundamental shift in Argentina’s stance toward business and trade. Last week, he even reached a settlement with some bondholders for $250 million.
Analysts say settling defaults with creditors and stopping deficit spending would improve Argentina’s economic prospects greatly, because Argentina was once an economic powerhouse until the default and other fiscal decisions left it in crisis.
Over the past two months, Marci has removed export taxes for agricultural products, abolished most currency controls, and taken steps to remove subsidies on electricity, food, and natural gas.