After lengthy negotiations, Argentina finally reached an agreement with its foreign creditors last week. But now, leaders are faced with the arduous task of convincing Congress to approve the legislation needed to comply with the deal — a necessary step if Argentina hopes to once again gain access to global capital markets. Under the terms of the agreement, Argentina must give $4.5 billion to its creditors by April 14, repaying about 75 percent of what it owes. Before it can do so, though, Argentine President Mauricio Macri's administration must convince lawmakers to repeal what are colloquially known as "the lock laws," which prohibit the government from settling its debt.
Unsurprisingly, Macri's urgent need to lift the restrictions has led to a heated debate with the opposition-controlled Senate. However, the heads of Argentina's cash-strapped provinces will ultimately be the ones to decide whether or not the country settles its debt. Provincial leaders hold enormous sway over their representatives in Congress, and they are unlikely to support any legislative action unless they are guaranteed more funding once it becomes available. A decision is expected to be reached March 8, and as the final hours of negotiation approach, it will be important to monitor several key figures and governmental bodies to determine how likely Argentina is to finally settle its debts.
The Power Players
Sergio Massa: Massa leads the dissident Peronist faction Renewal Front, which controls 37 seats in the lower house. (Macri and his allies together control 89 seats.) Former President Cristina Fernandez de Kirchner's party, the National Front, opposes the repeal of the lock laws and controls 81 seats. Macri needs Massa's support, but Massa will not yield to Macri's attempts to settle Argentina's debts without something in return. In exchange for his bloc's backing, Massa will likely want more influence in Macri's future domestic and foreign policy decisions. He will also probably demand more say in setting the government's maximum debt ceiling. While Macri wants to establish a debt ceiling between $11 billion and $15 billion, Massa's supporters want to set it lower. Throughout the day, Macri and Massa will continue their negotiations, but Macri will ultimately have to yield to Massa's demands.
Renewal Front economists: To legitimize his requests, Massa will depend upon a team of economists, including Marco Lavagna, who currently leads the Renewal Front's economic advisers. This group has been advising Massa to support the repeal of the lock laws, but only in exchange for infrastructure projects. Macri has already offered to absorb part of Massa's general expenses within his coalition's regions and cities of influence, but Massa rejected the offer on the basis that he would rather receive funding for infrastructure projects. Still, Massa knows that it is in his interest to support the lifting of the lock laws, because if he does not there will be no international credit to invest at all.
Alfonso Prat-Gay: Prat-Gay, Argentina's finance and tax minister, and Luis Caputo, Argentina's finance secretary and primary negotiator with its creditors, are Macri's biggest backers and the main drivers behind Macri's bid to lift the lock laws. Along with advocating the reversal of the legislation, the two want Argentina to sell an estimated $15 billion in bonds to pay its debt. Of these funds, $6.5 billion would be used to pay off the U.S. bond holdouts, which have accepted 25 percent less than the face value of their bonds. The remaining $8.5 billion would be used to pay European bondholders. However, Massa is not sold on this scheme and wants to discuss it further before approving it.
Peronist and Kirchnerist provincial governors: Argentina has a long history of political movements centered on individuals. The Peronists and the Kirchnerists are the best examples of this phenomenon. The Peronist governors of Salta, Tucuman, Entre Rios and Chaco already support Macri's proposal. In fact, these governors have already asked their Kirchnerist counterparts to back the deal, too. Salta Governor Juan Manuel Urtubey has been a particularly vocal supporter of Macri, which is significant because of his substantial influence among the Kirchnerists. However, even these groups are making demands in exchange for their support, namely the continuance of a revenue-sharing decree.
This decree, which was enacted during the past administration, mandates that the central government dedicate 15 percent of its national budget to the provinces. However, as part of Macri's budgetary tightening, he has vowed to reduce the amount each year until it reaches zero in 2021. Because the opposition governors know that funding from Buenos Aires will eventually disappear, they are demanding increased infrastructure allocations. If Macri manages to strike a deal in terms of funding and investments, with the understanding that the revenue-sharing agreement will be eventually eliminated, then these figures will likely support Macri in his quest to abolish the lock laws.
Cristina Fernandez de Kirchner and her supporters: Former President Cristina Fernandez de Kirchner has vowed to fight Macri's repeal of the lock laws. Fernandez, through congressional representative Hector Recalde, will use all of her influence to counter Macri and Massa. She has already appealed to nationalism and to her power bases to protest Macri's liberalization of the economy. Groups that support her, such as La Campora, will likely stage protests against the lifting of the lock laws. However, the former president will be limited in how much she can challenge Macri's repeal of the laws because Macri is steadily winning over several Front for Victory legislators, including Diego Bossio and Oscar Romero, who are seeking stronger ties with Macri in the hope of gaining more funding.
