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Presidential frontrunner says Argentina 'virtually' in default

Alberto Fernandez, the Peronist presidential candidate in Argentina, trounced conservative President Mauricio Macri in August 11 primaries seen as a bellwether (AFP Photo/ALEJANDRO PAGNI)

Buenos Aires (AFP) - The frontrunner in Argentina's presidential race, Alberto Fernandez, said in local press interviews that the country is "virtually" in default and should renegotiate its bailout loan agreement with the International Monetary Fund.

Fernandez, a Peronist whose running-mate is former president Cristina Kirchner, trounced conservative President Mauricio Macri by a wide margin in bellwether primary elections held August 11.

The shock result sent financial markets into a tailspin, prompting Macri to promise salary hikes and tax cuts, back-pedaling on his unpopular IMF-backed austerity program.

On Saturday, Finance Minister Nicolas Dujovne resigned in the wake of the debacle and was replaced by Hernan Lacunza, a respected economist with broad political ties.

Fernandez, now the clear favorite to win upcoming presidential elections October 27, laid out his views of the economic situation in a series of newspaper interviews over the weekend.

"I would say there is a sole incontrovertible reality and that is that Argentina under these circumstance is unable to meet the obligations it assumed," he told the newspaper Clarin.

"We have to understand that we are virtually in conditions of a default, and that is why Argentine bonds are worth what they are worth, because the world realizes that it can't pay," he said.

Macri negotiated a 56 billion dollar bailout from the IMF in 2018 to steady turmoil in the currency market, but after last week's election rout the peso plunged 20 percent and Argentine stocks lost 30 percent.

Fernandez pointed to Argentina's debt default in 2001 as an example of how to handle the current situation.

"Argentina should fulfill its obligations," he said. But he recalled that after the last default, the country negotiated with its creditors "one by one."

"We have to sit down to discuss it one by one, as we did with the debt at that time. Remember that we asked bond holders to accept a 75 percent discount."

In an interview with La Nacion, Fernandez said, "The only apparent solution is to postpone the dates" when debt payments are due.

- Trade agreement -

Fernandez also appeared to put in doubt a trade deal reached recently between the EU and the South American trading bloc Mercosur, of which Argentina is a member along with Brazil, Paraguay and Uruguay.

"The treaty does not exist," he said. "What exists is a series of points to be agreed which will require two years of negotiations."

"What I am going to do with the agreement... (is) take it up, study it, try to extract the best advantages for Argentina, reject the harmful things. And if we can reach an agreement, welcome."

Brazilian Economy Minister Paulo Guedes warned last week that Brazil would withdraw from Mercosur if Fernandez is elected and attempts to close the trading bloc.

Fernandez dismissed those concerns as "silly."

"If (Brazilian President Jair) Bolsonaro thinks that I am going to close the economy and that Brazil will then leave Mercosur, he can rest easy, because I'm not thinking of closing the economy," Fernandez said.

Referring to Bolsonaro, Fernandez said "the manner and arrogance with which he speaks, among other things, bother me. But the truth is Brazil is much more important than Bolsonaro."