Buenos Aires (AFP)

The Argentine government extended the deadline it had set for restructuring its debt by $ 66 billion for the second time on Thursday, setting June 2 as the new date, the economy ministry announced.

The extension of the negotiation period by only ten days seems to show that the Argentine government and its creditors are close to an agreement, although the new deadline is not necessarily final, as the government announced on Thursday.

The negotiations were supposed to be completed by May 8, but had been extended until Friday, when interest payments of $ 500 million were due. If it is not canceled, the country will default on payment.

It seems certain that this payment will not be honored because the government has included the three titles of the deadline, called 2021, 2026 and 2046, in the restructuring plan and it considers the date of May 22 as "anecdotal", according to the word from the Minister of Economy Martin Guzman.

"If the majority (of creditors) agree to an exchange, the default will be very short. I do not think there will be a cut in letters of credit", which would prevent essential imports such as medical equipment for example , notes to AFP the economist Marina Dal Poggetto from the company EcoGo.

"But if they block the negotiation, we will pay dearly for it," she said.

If the default occurs, it will be the ninth in the history of Argentina. The most recent dates back to 2001, with an historic default of $ 100 billion that had triggered the worst social and economic crisis in the country.

Almost twenty years later, Argentina is once again in bad shape: the economy has been in recession for two years, inflation has peaked (53% in 2019) and poverty has continued to climb ( 33% in 2019).

The pandemic of the new coronavirus has drastically slowed economic activity and forced the government to release funds to mitigate its effects on the most vulnerable residents and businesses.

- Negotiation continues -

The Minister of Economy had already declared this week that the negotiations would be extended beyond Friday.

At the same time, Hans Humes, CEO of Greylock, one of Argentina's major credit funds, said it was possible that "the government is flexible enough to reach an acceptable agreement".

"I think the big creditors understand that finding a solution (...) is in their own interest," he added.

A source involved in the discussions had also indicated, before the minister's announcement, that the "restructuring would be extended in June". "The government will not pay the $ 500 million and the funds will not go to court. There is a default but the negotiations continue," the source told AFP.

The International Monetary Fund, which is supporting Argentina in its restructuring, said it was confident about "the willingness of the two parties to continue discussions to reach an agreement," according to spokesman Gerry Rice.

According to the debt calendar, other interest payments are scheduled for late June. With a 30-day grace period, the country could count on a respite until the end of July.

But if there is no agreement by that date, "bondholders will likely think it will be more convenient to go to court, given Argentina's difficulty in reaching an agreement. in the short term, "said Ignacio Labaqui of Medley Global Advisors.

A situation of default allows creditors to demand before international justice an "acceleration" of the repayment of the debt, namely the request for its full payment.

Another threat is that hedge funds, known as "vulture funds", acquire Argentine debt at low prices before turning to international justice. In 2014, they had already won a legal victory against Argentina.

© 2020 AFP