Argentina's offer to foreign creditors is "intelligent, balanced and realistic," according to a Columbia University professor who spoke to President Alberto Fernández about the proposal.
Economist Jeffrey Sachs said he has discussed the general outlines of the plan with the government in recent months, although he did not design it himself. The offer to restructure US$65 billion in debt does not include interest payments for three years or principal payments until 2026, and has already been rejected by creditors.
The offer "could even avoid a cut in nominal values by refinancing most or all of Argentina's debt at low interest rates with nominal values intact," Sachs wrote. "Those low interest rates would still be higher than the long-term rates in the United States or Germany.”
Sachs confirmed that he spoke with President Fernández last week by video conference, shortly after Argentina made its offer on April 17. They talked about the coronavirus pandemic, the global economy and Argentina's debt, he added.
A spokesman for Fernández also confirmed the call and said Economy Minister Martín Guzmán participated as well.
Guzmán says Argentina cannot pay more than it offers. Before joining the new Fernández government last December, he worked at Columbia University and developed close ties with Sachs and Nobel Prize-winning economist Joseph Stiglitz.
Sachs has advised numerous governments around the world on economic policy and debt restructuring, including in Latin America. The economist says dozens of developing countries will need some degree of debt relief from private creditors this year, either through principal or interest payments.
"Some will need a capital transfer, others a refinancing at lower interest rates with longer maturities," Sachs wrote. "The question is whether this will happen in an orderly fashion or at random.”
Argentina decided not to pay interest on some of its bonds maturing on April 22 and is trying to negotiate a deal with creditors. If no agreement is reached by May 22, the government will default at the end of a grace period. It is estimated that the economy will contract for the third consecutive year in 2020 and that inflation will remain close to 50 percent.
by Patrick Gillespie, Bloomberg