US Senators Warn Argentina Risks Credit Default

Friday, 07 Feb 2014 01:07 PM

 

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Argentine President Cristina Kirchner's government was accused by a leading Republican senator Friday of risking a credit default given its currency woes and of failing to stand by its democratic promises.

The strains in diplomatic relations were aired during questioning of the next proposed U.S. ambassador to Buenos Aires, Noah Mamet, at the Senate Foreign Relations Committee in Washington.

"It looks like they're headed for another default, because all the actions they're taking today seem to be designed to avoid a short-term default, but long term, their structural problems are extraordinary," said Republican Senator Marco Rubio.

"We have this trend in Latin America of people who get elected but then don't govern democratically. Argentina is an example of this," said Rubio, comparing the country to Venezuela, which also is suffering high inflation.

Argentina, Latin America's third-largest economy, appears powerless in the face of the hemorrhage of the peso. The central bank has said that it burned through $2.1 billion in reserves in January alone.

The government is struggling to beat back a mounting rush into dollars that has stoked 26 percent inflation despite price controls on many items and pressure on businesses to avoid price increases.

Rubio, who has been talked of as a possible U.S. presidential candidate in 2016, told Mamet: "I anticipate, quite frankly, that there is a very high likelihood that if you are confirmed, while you are in that post, you are going to have another similar collapse in Argentina to what you saw economically just a decade ago."

The Republican senator's comments, however, were rebuffed for their "arrogance" in Buenos Aires, by Cabinet Chief Jorge Capitanich.

Argentina's foreign reserves, crucial to service foreign debts and pay for needed imports such as fuel, have tumbled from $52 billion at the beginning of 2011 to $28.5 billion as of Jan. 30, according to Central Bank data.

Seeking to play up more positive aspects of U.S.-Argentine relations, Mamet mentioned American investment, but senators on the committee seemed unconvinced.

"We have bondholders who don't get paid," said Senator Robert Menendez, a Democrat.

"We have debt to the United States that they keep playing with by saying 'we're going to renegotiate,' and never get to a renegotiation," he added.

© AFP 2014

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