Argentina risks credit default : US senator

AFP/New York

Argentine President Cristina Kirchner’s government was accused by a leading Republican US senator of risking a credit default and of failing to stand by its democratic promises.

Latin America’s third-largest economy appears powerless in the face of the hemorrhage of its currency, the peso, and Argentina’s central bank has said it burned through $2.1bn in reserves in January alone.

Strains in diplomatic relations between the US and Argentina were aired during questioning of the next proposed US 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, who has been talked of as a possible US presidential candidate in 2016.

“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 is also suffering high inflation.

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

Rubio 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 were rebuffed for their “arrogance” in Buenos Aires by Cabinet chief Jorge Capitanich.

And US State Department spokeswoman Jen Psaki said that the administration of President Barack Obama does not share the senator’s views and dismissed fears of possible clashes with Buenos Aires.

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

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

“And just the rosy view that we have business there — yes, we have business there. What we also have is bondholders who don’t get paid,” said senator Robert Menendez, a Democrat. “We have debt to the US that they keep playing with by saying, ‘we’re going to renegotiate’, and never get to a renegotiation,” he added.