Buenos Aires (AFP)

Supported by the International Monetary Fund (IMF), which declared its debt unsustainable, Argentina is now engaged in a race against the clock to negotiate short-term discounts with its creditors.

Since taking office in December, center-left president Alberto Fernandez has repeatedly hammered that his country, in recession since mid-2018, could not repay its debt (311 billion dollars, more than 90% of GDP) , only on the condition that it finds the path of growth.

Between uptight creditors who do not want to move an iota and the important deadlines which the country will have to face at the end of March, the IMF sided with the government, judging, after more than a week of mission on the spot , that the country's debt was "unsustainable".

"They accuse us of being populists, irresponsible, but the result is that we wake up today with the IMF who proved us right," said Alberto Fernandez, the day after the announcement of the financial institution.

Argentina is facing the worst economic crisis since 2001. The economy has been in recession for almost two years, the poverty rate has reached nearly 40% and inflation in 2019 has exceeded 50%.

"We have a good opportunity to negotiate something reasonable because the IMF has every interest in avoiding a default," said Hector Torres, former representative of Argentina to the institution.

Of its 311 billion debt, Buenos Aires wants to renegotiate 121.9 billion (35% of GDP) with holders of private bonds and 72.6 billion (21.4% of GDP) with multilateral and bilateral organizations.

"The IMF is obviously an authorized voice on the financial markets, and the fact that it says that the debt is unsustainable may weaken the position of private creditors," analyzes economist Matias Rajnerman of the Ecolatina cabinet.

- "Significant discounts" -

For the Fund, Argentina must obtain "an appreciable contribution from private creditors", namely debt forgiveness, reduced interest or deferred payment.

A position that "eliminates any doubt that private creditors will have to bear large discounts," said the firm Capital Economics, which plans "long fights" with bond holders unwilling to yield.

Claudio Loser, a former IMF senior official, says that for the time being "it is not possible to know the amount of the discount" that private creditors will have to accept, but he estimates that it could reach 30% of capital.

However, according to this expert, IMF support will only take effect if a new program with Argentina is agreed, "otherwise, the creditors will not know what to expect".

In 2006, after paying its entire debt to the IMF, Argentina had been frozen for ten years its relations with the institution, until Liberal President Mauricio Macri (2015-2019) took out a loan of $ 57 billion in 2018, of which $ 44 billion was finally disbursed.

Argentina, whose international reserves are around $ 44 billion, will present its proposals to creditors in less than a month, while the deadlines scheduled for the end of March amount to $ 34 billion.

Of all the maturities running in 2020, only $ 4.3 billion in bonds are, however, under foreign law and can therefore be subject to international arbitration or to the courts of other countries.

"The government will be able to honor its debts in 2020, given that more than 80% of them were contracted under local law and could be renegotiated unilaterally by the Parliament", explains Capital Economics.

Last year, Mauricio Macri's government had already rescheduled its debt to holders of bonds under local law.

© 2020 AFP