Argentina, in the grip of a serious economic and social crisis since 2018, negotiates with its private creditors the restructuring of a significant part of its debt – 66 billion dollars on 323 billion (61 billion euros on 298 billion). The government’s offer includes a 5.4% haircut on capital, 62% on interest, and a three-year moratorium on payments. Martin Guzman, the minister of economics since December 2019, and a former researcher at Columbia University in New York, fears a default if no agreement is reached before May 22.
Negotiations between Argentina and its private creditors did not result in an agreement on the scheduled date of May 8. What are the main sticking points?
Our priority is to obtain a lasting agreement, which will make it possible to restructure the debt in a manner compatible with the return of sustainable growth in Argentina. We have decided to extend the deadline until May 22. Some creditors accepted our offer, others did not. We are trying to resolve these disputes, but we do not want to make promises that we will not be able to keep, such as paying high interest rates as demanded by some creditors when we do not have the capacity.
On top of that, we are facing the Covid-19 crisis, like the rest of the world, which makes our situation worse. We had started a debt restructuring process in an already difficult context, and, despite the Covid, we continue to move forward on this process, without jeopardizing our medium and long term forecasts. We have presented an offer and are open to alternative proposals which respect the constraints we face.
What will happen if the negotiations do not reach a result before May 22. Could Argentina default on payment?
Argentina today faces conditions that are those of a virtual default. The "country risk" is very high, and the conditions of access to credit are very bad. We wish to return to a bearable debt, to have conditions allowing the return of growth, and to obtain an appropriate integration of Argentina in the international credit markets. The sooner this happens, the better it will be for everyone involved.
We want to avoid a situation of technical default, but it is not only up to us. We need collaboration, cooperation and common sense from our creditors. You should know that 52% of our children under the age of 14 live below the poverty line. A bad deal would lead to more poverty, inequality and unemployment.
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