Buenos Aires announced late Monday that it had reached an agreement to restructure 99 percent of its issued debt, in accordance with the provisions of foreign law, amounting to $ 66.13 billion, in a move that culminated in more than four months of arduous negotiations between Argentina and its creditors and that would bring the country out. From a default.
Argentine Economy Minister Martin Guzmán said that under the agreement, “99 percent of the issued debt has been restructured in accordance with the provisions of foreign legislation.”
The announcement comes less than a month after Buenos Aires announced that it had reached an agreement with three groups of the country’s main creditors to renegotiate the terms of the debt. Guzmán, with President Alberto Fernandez and Vice President Christina Kirchner standing by his side, added that “thanks to the dialogue process, there was broad acceptance” of this agreement.
The minister explained that thanks to the agreement reached, his country will receive an exemption from paying $ 37.7 billion in debt, while the annual interest rate will decrease from 7 per cent to 3.07 per cent. He added, “This gives us a sufficient economic time frame to develop sustainable policies that achieve development.”
The minister pointed out that this agreement removed from the country the specter of being prosecuted abroad by speculative funds, a nightmare that it had previously experienced in the past. In turn, President Fernandez welcomed the agreement, stressing that her country is able to fulfill its obligations. “We are out of the maze,” he said.
As for the rest of the dollar-denominated debts that are not covered by the agreement, amounting to 1 percent of the total of these bonds, Matthias Rachnermann, an analyst at Ecolatina, said, “This debt will definitely be repaid. This is a very small amount. “600 million dollars is practically nothing for Argentina.”
Under the agreement, Argentina will pay these bondholders 54.8 cents per dollar, a significant increase compared to the 39 cents it initially offered them. These bonds represent roughly 20 percent of Argentina’s total $ 324 billion debt, which equates to 90 percent of the country’s GDP.
Argentina has been in default since May 22, when it had to pay $ 500 million in interest on these bonds. The Argentine economy has been in recession since 2018 and will suffer more this year due to the “Covid-19” epidemic, with GDP shrinking by 9.9 percent, according to IMF projections. Reaching this agreement will facilitate negotiations that the government launched with the International Monetary Fund last week to obtain a new loan.
The Argentine government has formally requested to start negotiations with the Fund on a new financial aid program. In a letter to Kristalina Georgieva, Executive Director of the International Monetary Fund, the Minister of Economy and the President of the Central Bank Miguel Angel requested formal talks leading to a new program to replace a conditional loan agreement of $ 57 billion reached by the two sides in 2018. “We are resolute in the letter. Resumption of the process of seeking a coherent course in terms of public finances if the effects of the pandemic disappear.
The $ 57 billion financing program, the largest in the history of the IMF, was reached under the administration of former Argentine President Mauricio Macri.
The letter detailed the efforts of the government of President Fernandez to prevent further declines in production and employment, push down inflation and restore credit sustainability. Guzman said in a tweet that a new IMF program that includes rescheduling debt maturities “is a necessary step to solve the economic crisis that has dominated the country in recent years.”
In a separate statement, the government said Fernandez told Georgieva during a phone call that a new deal should focus on economic recovery and solving pressing social problems.
For her part, Georgieva said in a statement that Argentina had requested a new arrangement with the IMF, and that it had had a “very positive and constructive” conversation with Fernandes.
And last month, official data showed that industrial production in Argentina fell 6.6 percent in June compared to the same month last year, which is a better performance than expected. The market had expected a decline of about 10 percent, according to analysts. With the decline recorded in June, industrial output losses in the first six months of this year rose to 14.6 percent compared to the same period last year, according to “Reuters”.
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