Argentina’s New Leader Needs to Deal With Debt First

There was no mystery about the top item on newly elected Argentine President Mauricio Macri’s to-do list as he prepared to take office on Dec. 10: make peace with the nation’s disgruntled creditors.

Macri, the center-right former mayor of Buenos Aires, won the presidency on Nov. 22, pledging to revive South America’s second-biggest economy. Among the problems: a recession, rampant inflation, a growing deficit, and falling foreign reserves. To address any of those challenges, he’ll have to resolve a 14-year-old standoff with U.S. hedge funds holding defaulted Argentine bonds, an impasse that’s made the nation a pariah in international credit markets. A settlement with holdout creditors offers the only path for Argentina to borrow the money it needs to repair the economy and finance development. “If Macri doesn’t get this done, he can’t do anything,” says Alberto Bernal, chief emerging-markets and global strategist at XP Securities.