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ECONOMY | 04-08-2020 14:19

'We resolved an impossible debt,' declares delighted Fernández

President Alberto Fernández hails government after officials confirm Argentina has reached an agreement with three major creditors over restructuring of US$66-billion debt.

President Alberto Fernández has hailed his government after officials confirmed Tuesday that Argentina has reached an agreement with three major creditors over the restructuring of a US$66-billion debt.

The Peronist leader's government had set an August 4 deadline to complete a deal but it has now pushed the date to August 24 "to give effect to the agreement," which came after months of wrangling and extensions.

Asked how he felt in the wake of a decision by journalist Iván Schargrodsky, Fernández said he was "very happy for the country."

"We resolved an impossible debt in the biggest economic crisis in memory and in the midst of the pandemic," said a delighted Fernández.

"In these seven months we were told that we did not understand anything and that we were on the way to failure because we did not accept offers from creditors. It turns out that we finally closed an agreement that allows Argentina to save US$33 billion from the debt assumed in the next 10 years," said the Frente de Todos leader.

"Now the horizon is clear for where we want to go to," he added.

Fernández also expressed support for Economy Minister Martín Guzmán, who has been repeatedly criticised by the opposition during negotiations.

"He was central and gathered the objectives that we had to meet," said the president, praising his minister for adopting "a correct strategy."

"We worked all this time very together and we will continue to do so. Martín is a man of enormous technical and ethical value," he said.

Fernández argued that now was the time for business leaders to invest and "commit" to Argentina, saying the deal meant a "better scenario" for them lay ahead.

"Argentina needs them to commit to putting the country on its feet. And to understand that after the pandemic we must rethink many things. We realised the weakness of the global financial system –now we must build a capitalism with more social commitment," he said. "One that better distributes profits."

Negotiations

The Economy Ministry said in a statement that the deal "will allow members of the creditor groups and such other [bond] holders to support Argentina's debt restructuring proposal and grant Argentina significant debt relief." 

The bonds, issued under foreign legislation, represent roughly a fifth of the country's US$324 billion debt, which amounts to around 90 percent of its GDP.

Argentina has been in default – for the ninth time in its history – since May 22 when the country missed a deadline to pay US$500 million in interest on the debt that is subject to the current negotiation. It missed another deadline last week to pay US$600 million more.

The deal involves the Ad Hoc, Argentina Creditor Committee and Exchange Bondholder groups, as well as "certain other significant holders," the Economy Ministry said.

Last month the three major groups, claiming to represent "60 percent of the exchange bonds and 51 percent of the global bonds in circulation," giving them veto power over any deal, said they had rejected Argentina's latest proposal.

The government had offered a deal that represented 53.5 cents on the dollar – a significant improvement on its original starting position of 39 cents – but the creditor groups were holding out for 56.5 cents on the dollar.

The two sides found agreement at just over 54 cents on the dollar, an official source told AFP.

The deal "allays fears of another debilitating legal scrap, akin to what followed the country's 2001 default," Nikhil Sanghani of analysts Capital Economics said.

But he warned "we doubt that the deal is enough to bring sustainability to Argentina's public debt over the medium to long term."

The payment dates on new bonds have been brought forward by a couple of months "without increasing the aggregate amount of principal payments or interest payments that Argentina commits to make," the economy ministry said.

Argentina has also agreed to advance the maturity dates for its bonds issued in 2005, 2010 and 2016.

"The economic issue is resolved, we just need to see the legal aspects in detail," analyst Sebastian Maril told AFP.

More debt troubles loom

Although Argentina lost its access to international markets two years ago, reaching a deal with creditors is key as the country looks to also renegotiate the repayment of a US$44 billion bail-out loan it has received from the International Monetary Fund.

Former president Mauricio Macri had negotiated a US$57-billion loan from the IMF but Fernández suspended the remaining US$13 billion in disbursements when he took office in December.

"This agreement should help to bolster investor, business and possibly consumer confidence in Argentina in the near term," said Sanghani. "Moreover, the deal is likely to pave the way for a renewed agreement between the IMF and Argentina's government."

As well as its commitments to international creditors, Argentina must resolve the situation surrounding a US$41.7-billion debt issued under national legislation whose payments have been deferred until December 2021.

Fernández's government has offered similar conditions to those agreed with the international bondholders.

In recession since 2018, Argentina's economy has been further punished by the coronavirus pandemic. The IMF estimates it will contract by 9.9 percent this year, though private estimates expect a deeper contraction.

More than a third of the 44 million population live in poverty and annual inflation stands at over 50 percent.

– TIMES/AFP

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