Less Country Risk is Less Poverty

This week, the Chamber of Deputies approved payment to the holdouts. Through this law, the payment of a debt, which is currently held by various funds and which the Argentine state has been carrying for 25 years, is authorized.

With this agreement, we leave behind one of the most serious economic and political crises in our history. A time when the government irresponsibly managed the accounts by increasing the deficit, maintaining a convertibility regime with a looted Central Bank and a level of debt that became unpayable. We all know how this movie ended: debt default, end of convertibility, devaluation, and an asymmetric pesification of bank deposits in foreign currency, brutally violating the property rights of all Argentines.

During the first 10 years after the default, debts were paid to foreign bondholders, leaving a remnant of debt holders outside this agreement. This ended up being discussed in international courts, generating firm adverse rulings for our country. The Bainbridge Group and the group led by Attestor accept a write-off of over 30% on amounts claimed in firm rulings under U.S. jurisdiction. The agreement prevents creditors from initiating new legal actions or interfering in Argentine financial operations until the operation is completed.

The government of Javier Milei takes responsibility and honors the debts, but this is not enough. Solving past problems does not guarantee that they will not return in the future. President Milei and his entire economic team know that the only way for Argentina not to fall into a new debt spiral is by not generating more debt. To achieve this, it is essential to maintain a fiscal and financial surplus. By not spending more than our income, we guarantee that we do not create new debts for our future generations of Argentines.

During the debate on this law in the Chamber of Deputies, many absurdities were heard. One of the most resonant is that we are paying the vulture funds when improving the lives of retirees, students, and workers is postponed. Even a deputy calculated how much each retiree would receive if instead of paying the debt, it were distributed among them.

This delusional thinking forgets something essential that if the country does not pay its debts, the most affected will be the most vulnerable sectors. Let’s pause on this point for a moment.

Any investor, before investing their money in a country, evaluates the conditions that it has: tax levels, regulations, legal security, among many other things. A country that does not pay its debts generates distrust among potential investors. As a consequence, investors avoid allocating capital to our country or, if they decide to take the risk, they will demand a very high return.

That is what is reflected in the so-called Country Risk. The higher this indicator, the greater the distrust of the markets and the difficulty in attracting new investments.

It is enough to remember what happened during Alberto Fernández's government when the country risk almost reached 3000 points and at the same time poverty increased. In contrast, if we manage to lower the country risk by increasing confidence in the Argentine state, not only will companies access credit at lower rates, but also Argentines will access more affordable products and services. In this way, the most vulnerable sectors, having been the hardest hit during Alberto Fernández's government, begin to access goods and services of better quality and price, as is happening in Milei's administration.

That is why there is no more efficient measure to reduce poverty than ordering public accounts. Maintaining a fiscal and financial surplus, eliminating monetary issuance, reducing taxes, and paying our debts or refinancing them under better conditions are the foundation for the country's growth and development. In just two and a half years, our achievements are: reducing the country risk from 2500 points to 430 points. And the decrease in poverty from 55% to 28.2%.

Argentina deserves to be a reliable country and we are on the right path to being great again