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Argentina, in default of payment, but negotiations are continuing

Argentina is coming this Friday, in default of payment, by not honouring the interest payment of $ 500 million, but the negotiations with creditors for restructuring the debt continue, indicated to the AFP a government source.

read also : In Argentina, a sick economy became a patient at high risk

"We don't pay (the interest), but negotiations continue," said the source within the argentine government. This is the ninth default of payment of the country's history. But the government of president from the centre-left Alberto Fernandez is seeking to conclude an agreement with the holders of bonds from argentina, without triggering "the artillery of default". Late Thursday evening, the government had already announced it would extend for the second time the deadline he had set for restructuring, designating June 2 as the new deadline.

The date of Friday, regarded as "anecdotal"

This extension is only ten days appears to show that the argentine government and its creditors may be close to an agreement, although the new deadline is not necessarily final, said Thursday the government. The negotiations were to result in the original no later than may 8, but, in the absence of agreement, they had been extended until Friday, date on which was due and payable on the interest payment of $ 500 million.

Well before the expiry of the time limit, however, it seemed a given that this payment is not honoured, the government has included the three titles of the deadline, called 2021, 2026 and 2046, in the restructuring plan. The date of Friday, was seen as "anecdotal", according to the comments of the minister of Economics, Martin Guzman. If the government indicates that negotiations are on track, the main group of creditors of Argentina, however, has demanded on Friday a "direct discussion and immediate".

"If they block the negotiations, we're going to pay dearly,"

"The group welcomes the intention expressed by Argentina to work with the creditors, but the acts are more eloquent than words. Last month, Argentina has had almost no communication substantially with its creditors," it said in a press release, a group composed of several investment funds, including BlackRock and Fidelity.

Martin Guzman has offered the bondholders an exchange of new securities with a grace period of three years without payment, a capital reduction of 5.4% and 62 % interest. But his offer was rejected. The creditors have presented their own proposals that the government is considering. "If the majority (of creditors) agreed to an exchange, the default will be very short", a statement to the AFP, the economist Marina Dal Poggetto of the company EcoGo. "But if they block the negotiations, we're going to pay dearly", she says.

In 2001, with a default history of $ 100 billion, the country had experienced its worst social and economic crisis. Nearly twenty years later, Argentina is again in bad shape : the economy is in recession for the past two years, the inflation has reached a peak (53% in 2019) and the poverty has not stopped rising (33% in 2019). The pandemic of sars coronavirus has also greatly slowed down the economic activity and forced the government to release funds to mitigate its effects on the inhabitants and businesses in the most vulnerable. The international monetary Fund, who supports Argentina in its restructuring, has said that he is however confident in the face of "the willingness of both parties to continue discussions to reach an agreement", according to his spokesman Gerry Rice.

The fear of the "bottom vultures"

according To the schedule of the debt, other timelines of interest are planned for the end of June. With a grace period of 30 days, the country could count on a reprieve until the end of July. But if there is no agreement by this date, "the bondholders will presumably think that it will be more convenient to call to justice, given the difficulty for Argentina to reach an agreement in the short term," said Ignacio Labaqui of Medley Global Advisors. A situation of default allows creditors to require before the international justice system an "acceleration" of the debt repayment, namely the application of its full payment.

read also : In Argentina, the uncertain future of Vaca Muerta, a gigantic oil deposit in Patagonia

Another threat : that of the hedge funds, known under the name of "vulture funds" to acquire argentina's debt at low prices before turning to international justice. In 2014, they won a court victory against Argentina.

The editorial team conseilleL'Argentina on the verge of paiementArgentine: containment extended to Buenos Aires, progressive reopening ailleursRestructuration of argentinean debt: new discharge of the creditors, the government maintains its offre5 commentairesMesuréle 24/05/2020 at 09:01 pm

Living on credit? This is what we do!
"as Long as it lasts !" said the mother of Napoleon.
But it did not last.
I am in his nineties and I hope it will last long enough. a
After me, the flood!

edgar19le 24/05/2020 at 04:06 pm

Argentina has to do, such as France, which accumulates the loans to pay the accrued interest not paid ... Remember we the name of this practice ... not to mention policy France is indeed in default of payment if they wanted to make a reconciliation accountant with a company. It n' has only one choice, to sell all his property and separation from a significant number of its (senior) employees

baz-chosesle 23/05/2020 at 06:42 pm

Argentina needs to leave the G20 to give up its place in the netherlands and Switzerland; South Africa, Turkey and saudi Arabia should also consider to leave the G20 soon because he will be relegated, for example, by Taiwan.

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