The Argentine government intends to reduce its debt to foreign creditors, as it faces a severe recession amid the emerging coronavirus pandemic. Argentine Economy Minister Martin Guzmán said on Thursday evening that both debt and interest payments would be postponed for three years.
In total, the government’s plan to reschedule the public debt relates to writing off 62 percent of the debt interest, or $ 37.9 billion, and 5.4 percent of the capital, or $ 3.6 billion. Argentina also requests a payment freeze for 3 years, which means that no amount will be paid until 2023.
Yesterday, the restructuring proposal was formally presented to the creditors. Beginning in 2023, the government then wants to resume interest payments and increase them step by step. “It’s clear that Argentina can’t pay anything at the moment,” Guzmán added.
Argentina is facing a serious economic crisis, and it suffers from an enlarged state apparatus, low industrial productivity, and the large size of the shadow economy, which deprives the country of tax revenues.
The government’s announcement of its plan sent the Buenos Aires Stock Exchange down 6.21%. The Argentine president said after this announcement, “(Friday) will be a decisive day. The markets will know what Argentina can pay and achieve. ” On Thursday, the Buenos Aires Stock Exchange declined, even if it recorded a significant increase between Monday and Wednesday (3.08 percent, then 6.58 percent and 4.19 percent).
The Minister of Economy said, “We tried to understand what creditors prefer from here, a proposal that includes a greater reduction of interest from capital.” Private creditors have 20 days to respond to the suggestion. The next maturity on April 22 is $ 500 million.
Claudio Lauser, a senior official at the International Monetary Fund, said that “negotiations will be complicated, but not impossible,” referring to the current conditions related to the outbreak of the new Corona virus, which has affected the global economy.
“But they are negotiations … if Argentina presents this proposal as the only option, it will find itself in a very difficult situation,” he added. They have to sit down to negotiate. ”
With this process, the Argentine government seeks to renegotiate foreign currency bonds of about $ 70 billion under international custody, which could expose it to arbitration procedures.
But the country’s past, which in 2001 experienced the largest default in history ($ 100 billion), is not in its favor.
And on the International Monetary Fund, from which Argentina owed 44 billion dollars, Guzmán announced that the government is working to develop a new schedule for repayment. He explained, “We continue to work with the IMF in a manner based on a new timetable. Argentina does not have to pay any amount to the IMF during the next three years.”