Wednesday, September 30, 2020
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ECONOMY | 05-05-2020 19:00

Guzmán says Argentina will miss US$2.1B Paris Club debt payment

Economy Minister Martín Guzmán confirms in interview that Argentina has missed a US$2.1-billion debt payment to the Paris Club, seeking restructuring.

After a cloud of uncertainty, Economy Minister Martín Guzmán has confirmed that Argentina has missed a US$2.1-billion debt payment to the Paris Club.

Argentina is in talks with the group of country-to-country lenders, he confirmed. The government has asked the creditor nations to postpone the payment for at least a year around six weeks ago, with the deadline for it expiring Tuesday.

"We are in negotiations to reschedule the Paris Club debt. We are not paying tomorrow," Guzman said in an interview with Reuters published today. "The Paris Club has been receptive and the process for rescheduling the debt is ongoing."

The situation increases uncertainty as to whether Argentina will be meeting its existing commitments within a crisis now compounded by the coronavirus pandemic.

Last week President Alberto Fernández rang up German Chancellor Angela Merkel to remind her of the necessity of postponing payment of the US$2.1 billion which Argentina owes the Paris Club and ask for her help.

The ongoing deadline forms part of the controversial agreement with the Paris Club signed in 2014 by then-economy minister Axel Kicillof, now the governor of Buenos Aires Province. 

Some economists and consultants harshly criticised that agreement for the conditions accepted and the final sum fixed for the debt, which took it up from an original debt of around US$6.5 billion to almost US$9.5 billion at the end of the negotiation.

The request to postpone the May 5 deadline was presented on March 13 in a note by the Economy Ministry to the Securities and Exchange Commission (SEC) of the United States, in accordance with its obligations as the country issuing the debt on that market. In that presentation the government also raised the possibility of renegotiating the 2014 agreement with the Paris Club.

The letter addressed to members of the Paris Club expresses "the decision of the Republic to postpone until May 5, 2021 the payment due on May 5, 2020, in accordance with the terms agreed by the Republic with the members of the Paris Club on May 29, 2014."

Another letter signed by Guzmán was sent last April 7 requesting the modification of the agreement with the Paris Club "mostly seeking an extension of the deadlines and a significant reduction of the interest rates."

The text sent to SEC in the US maintains that Argentina is in "constructive relations with the International Monetary Fund (IMF),” highlighting that the country’s intention is to seek "a new programme which will discuss the terms in which the debt incurred under the current stand-by programme agreed in June, 2018 would be replaced until the Republic can have access to international debt markets at sustainable interest rates."

– TIMES/PERFIL, with reporting by Fernando Nolé

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